Personal Info

Favourite Books:

• Benjamin Franklin – An American Life by Walter Isaacson
• Cryptonomicon; In the Beginning…was the Command Line; by Neal Stephenson
• Hyperion by Dan Simmons

Most Influenced By:Bob Noyce, Jerry Sanders

Twitter: http://twitter.com/NolanBushnell

Personal Blog: http://nolanbushnell.com/blog

Website: http://atari.com

Relevant Link: http://brainrush.com

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Nolan Bushnell who is one of the pioneers of the computer industry. He founded Atari and then went on to found Chuck E. Cheese. He also founded twenty other companies. It’s a real honor to have you here. So, Nolan, thanks for joining us.

Nolan Bushnell: Thank you.  

Adrian Bye: You want to tell us a little bit about your background, where you grew up and how things got started for you?

Nolan Bushnell: I was born and raised in Utah, about halfway between Salt Lake and Ogden. I graduated in electrical engineering, moved to California to the heart of Silicon Valley, and took a job with a company called Ampex, in high-density digital recording and video. It was one of the big movers and shakers in the Valley in the Sixties and Seventies.  

Adrian Bye: How long did you work at Ampex for?

Nolan Bushnell: Just two years.

Adrian Bye: What happened then?

Nolan Bushnell: Basically, I invented the core technology of the video game business, licensed that to a company called Nutting Associates. I went to work for them for a year and then decided to hang out my own shingle. My partner and I, I mean Ted Dabney, started Atari. And our first employee, Al Alcorn, as a training project invented Pong, and we were off to the races.

Adrian Bye: What drew you to California then? I remember as I was growing up seeing there were all these companies in California that were important, like Ampex, Atari, Commodore, and all the others. This was before we heard of Silicon Valley. You went out to California in the 60s. What drew you out there at that time?

Nolan Bushnell: There were two or three reasons. First of all, I thought that semiconductors were going to be important. And it was really where all the semiconductors were being created. Everybody was there, with the exception of Texas Instruments, and even they had a pretty good facility there. You had Intel, National Semiconductor, AMD. You could throw a rock from each of those to the other buildings. They were really the center of gravity of the Silicon research. I just thought that was going to be big, and I went down and interviewed there.

Adrian Bye: It was very clear back then that silicon would be very important.

Nolan Bushnell: Not to everybody. But I was an electrical engineer and I think a lot of people don’t realize the drastic change. Literally, when I started college we were learning about vacuum tubes and when I ended college we were learning about silicon. And semiconductors were such a superior technology to the vacuum tubes. Everything was better with silicon over vacuum tubes. You just didn’t want to build things with vacuum tubes anymore, and that had been the predominant technology basically during the previous century.

Adrian Bye: So you strike out on your own with your partner Ted. You didn’t create the game Pong, you made it first available on home consoles, right? It had been a game before?

Nolan Bushnell: Yes, we played it in college on big computers. Actually I think the very first ping pong game, I mean the very first one that anybody knows of, is by a guy named Willy Higginbotham who did a ping pong game in New York in 1958.

Adrian Bye: What happened next? I’d love to hear the beginning story of Atari.

Nolan Bushnell: We got the original prototype going. At the time we had a work-for-hire contract. When we started Atari our plan was to design games and license them to others. We didn’t perceive ourselves as having the capital or the expertise to go and manufacture ourselves. It seemed like a daunting task. And then we had this game and it was pretty fun. We thought hey, maybe our contractor will accept this instead of the driving game. We basically contracted to do a driving game for them. So we did that, went to them and they were unimpressed for reasons that were real but in the end turns out to be unimportant. Up till then any coin-operated game, video or otherwise, always had a single player mode. A lot of people were in Arcades and they would run around by themselves. To have only a two-player game was perceived to be a marketing flaw. They turned it down and I was disappointed. But the second unit, the company was Bally in Chicago. I climbed on an airplane to go to Chicago. The other game was put into a bar and tested. In fact it went in just before I left, and the first collections came in while I was in Chicago. This was kind of a famous story that’s been told and told. We got a service call that the game had broken, but the only thing that had happened was the coin box had totally filled up so it couldn’t take any more money. This was kind of a fault that we felt we were more than capable of remedying.   

Adrian Bye: What did you do then?

Nolan Bushnell: What you are talking about there was two or three years in. We basically funded the company by bootstrapping. We had no investor until we got a couple million VC money four years after that. Everybody thought that games were silly. How could they possibly be an important business?

Adrian Bye: I was then on the receiving end in Australia. Although I was using the Commodore 64 and not Atari so much, certainly some of my friends were. I’m in Tasmania, Australia, as a twelve year old. How were you getting your work over to my friends in Australia?

Nolan Bushnell: We were being quite successful in terms of selling Pong machines, and these were coin-operated. The coin-operated game business is worldwide just by its nature. But I hadn’t sold internationally. A guy came and said he wanted to represent me internationally. All we had to do was to give him a percentage. We did that and he basically blanketed the world with distributors for us. Probably a year later half of our revenue was derived from foreign markets.

Adrian Bye: How big were you in terms of sales at that point?

Nolan Bushnell: Probably 20 million.

Adrian Bye: So things grew. What happened then?

Nolan Bushnell: Allen Alcorn discovered this really new technology called n-channel for custom chips. And he felt that finally there was a way to put our technology into a consumer product. The price was right, the speed and the performance was right, and so we embarked on that.

Adrian Bye: Why bother doing that when you were already doing well with consoles as they were?

Nolan Bushnell: You know, there is this old thing that Andy Grove said: only the paranoid survive. I always felt that you always had to be aware of sources of potential competition. I felt that if there was a consumer game possible then somebody would do it. And from getting strength with that, they may be able to come back and attack us in the coin-op. I always felt strategically you had to take advantage of opportunities for growth.

Adrian Bye: You sold out and made 28 million dollars on it. Was this a deal you were forced to do? Would you have liked to keep going with Atari?

Nolan Bushnell: Yes and no. I wanted to take some money off the table and I was tired. I’d been fighting cash flow for six years because even though the company was growing we never had cash. A growing company consumes a certain amount of cash even though we were profitable every year. I think if I had just taken a two-week vacation I would have figured out a way to keep from having to sell.

Adrian Bye: And then a couple of years later the company was worth like 2 billion dollars.

Nolan Bushnell: Yes.

Adrian Bye: It seems like you are the genius that’s spotting the early stuff and then maybe letting it go before it gets too big.

Nolan Bushnell: I kind of am. I like the early phases better. Once a company starts to get big the CEO spends all their time with accountants and attorneys, and those guys are really boring.

Adrian Bye: You took 28 million dollars. That’s not a small sum. You were basically set for life back then.

Nolan Bushnell: That’s correct. Though I actually made more money personally on Chuck E. Cheese.

Adrian Bye: Oh really? So why don’t you tell us how that story happened?

Nolan Bushnell: Chuck E. Cheese was started inside Atari and was meant to allow the company to vertically integrate towards this market without really competing. The competition was for locations. I felt if we built our own locations that wouldn’t damage our reputation with our customers who were buying our coin-operated games by thousands.    
Adrian Bye: Were you still connected with Atari at that point or had you totally moved on?

Nolan Bushnell: I actually built the first one about six months prior to my sale to Warner. So it actually went with the sale. But Warner, upon taking over, said we don’t want this, why don’t you sell it off? I said, let me buy it, and they said okay. So I bought that outside of Atari and was growing it slowly while I was actually still working out my Atari contract.

Adrian Bye: So you had the idea for Chuck E. Cheese while you were at Atari, you built it out while you were doing Atari. You saw the next thing, so that was the direction that you went in. Then you sold Atari, you took Chuck E. Cheese back, and that was a complimentary thing that you went to build out as a separate venture.

Nolan Bushnell: Exactly right.

Adrian Bye: You had kids then. Your daughter was starting to grow up, was this what inspired it?  

Nolan Bushnell: Partially. But it was also just the realization that kids wanted to play our games but didn’t have a good venue to do so. Bars weren’t good for them. Believe it or not, this was before pizza parlors had video games in them.  

Adrian Bye: How did Chuck E. Cheese do? Did you scale that all from Northern California, from Silicon Valley?

Nolan Bushnell: Yes. Basically I opened up a shop down the street from Atari and started growing it and franchising. I took that public, did several capital raises to fund the growth, grew it to 250 stores. These were all big locations, doing one and a half to two million dollars a year. That was a pretty substantial company when I sold it.   

Adrian Bye: What did you do after you sold Chuck E. Cheese?

Nolan Bushnell: I started as a Venture Capitalist. I started this thing called Catalyst Technologies, which was the very first technical incubator. We incubated many of the twenty companies we talked about. I wrote the business plan, put people around. We did the first automobile navigation, we did the first online retail.

Adrian Bye: Did it affect your motivation, given that you had cashed out pretty well on two companies already? Or did you just want to keep starting stuff?  

Nolan Bushnell: I liked the idea of starting. I started doing some sailboat racing, and I always liked to travel a lot. My wife and I did a lot of charity work and things like that. I think I wasn’t quite as driven as when I was doing Atari and Chuck E. Cheese, but pretty driven.   

Adrian Bye: So you traveled a bit, you took some time out, started a bunch of different companies and maybe zoomed forward to what you are doing today. You are working on a company doing brain stuff and anti-aging?  

Nolan Bushnell: That’s correct. Basically, I think that I can use some interesting technology that I discovered and literally teach kids ten times faster in terms of certain subjects. And that’s quite interesting to me because I think that right now we have somewhat of a crisis in education. I think our kids are accustomed to a much higher level of interactivity and speed. The classroom is boring to kids today, it was boring when I was growing up. Boring academic institutions destroy enthusiasm which is maybe the worst amputation because I think almost everything in the educational realm comes from enthusiasm.  

Adrian Bye: That intensity when you can really engage in something and do something that really fascinates you.

Nolan Bushnell: Exactly. I could rant and rave about how screwed up school is, not only in how they teach but what they teach, how you fix things, the whole nine yards.

Adrian Bye: I just want to cover a little bit more on your current brain startup. Do you want to tell us how it works?  

Nolan Bushnell: It’s basically a business of creating learning engines, meaning that the brain science is encapsulated in how the information is presented. We are doing it much like Wikipedia where any teacher can put in a piece of curriculum, and they are called BrainRushes. They are ten to fifteen minutes in length for a kid to play, which turns out to be another optimum time frame for holding and generating attention. And with that we have a pretty robust system. What we want to do is crowdsource the curriculum, which means that everybody, every teacher can use it, put in the stuff and then publish it to everybody. And it’s free.

Adrian Bye: That’s a free thing that you’re going to distribute to schools?

Nolan Bushnell: Yes, just go to brainrush.com. Distribute to anybody who wants to learn. They are very simple games, but they actually have underneath the hood some really interesting brain science.

Adrian Bye: And this is from you having founded Atari and Chuck E. Cheese, so I guess this is an area that you know a little bit about?  

Nolan Bushnell: Yes, and it turns out that some of the principles of learning are the same principles that were required to make a good video game. You climb into some of the same neural pathways, you get some of the same endorphin responses. I actually think we can make education as addictive as video games.  

Adrian Bye: I feel like I can sit with you and talk for six hours. Thank you very much Nolan.

Nolan Bushnell: Thank you.

Personal Info

Favourite Books:

• Perfurme by Patrick Suskind

Most Influenced By:Rob Hubbard, Martin Galway, Tim Folon, Chris Hulsbeck

Personal Blog: http://www.facebook.com/pages/Romeo-Knight/298320186844672

Website: http://www.romeoknight.net/wordpress

Relevant Link: http://www.youtube.com/watch?v=Ych7zPsRWE8

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Eike Steffen who is in Germany, and he used to be known and maybe still is known as Romeo Knight. In the Amiga demo community Eike was far and away one of the best musicians that ever turned, and he was always very mysterious. Nobody ever knew him. He had a rule because I knew some of the people that worked with him and he would never talk to anybody. He always wanted to be this mysterious guy. Now we are twenty years later and I have the chance to interview Eike, so welcome.

Romeo Knight: Hello, nice talking to you. That wasn’t quite right what you just said. Back in the eighties when I started making music on the Amiga, it wasn’t about being mysterious. This was or is a computer community, and as most people know a lot of nerds and geeks are inside hacking on the computer. Even if I was doing some music I was some kind of nerd and I was not so much into socializing. I was more interested in making music. The Amiga was the platform for me, making music at home as a 16 year old. I was just interested in music and I was just too shy to communicate with other people. I was really shy. I remember I was not very much involved in the demoscene parties and stuff like that.

Adrian Bye: Why don’t you explain what the Amiga demoscene was about and how it was like and what it felt to be part of it?

Romeo Knight: It’s not only Amiga, it’s about old school computer platforms, like C64, Atari what we have got. The demo scene evolved from guys cracking software, removing the copy protection. Those were really smart guys to show all the other people who were doing that kind of stuff. They put intros in front of their cracked software they swapped all around. Those intros evolved over the years being more important than the actual cracked software that was connected to it. So years later that was the cracker scene. That was of course illegal, I mean those were the times, people didn’t care much about copyrights at that time. That changed a lot. The intros had music, funky graphics like jumping scroll texts, logos wobbling around and they evolved from being just intros to becoming whole demos. That’s why we call it the demo scene today. Demo because the people demoed their skills on programming the actual hardware. It was all about competition, about different groups doing intros, doing demos to show off. It’s a little bit like the hip hop scene a few years ago too. People wanted to show others that they ruled the scene.

Adrian Bye: It was very competitive?

Romeo Knight: Yes it was. People hated each other. There were flame wars long before the word flame war existed. Nowadays there is still cracked software all around, but it’s not connected to the scene from before. Those are totally different people nowadays who crack software and usually they don’t have any demos or intros anymore, just small things that don’t matter anymore. And actually, what we got now evolving from this illegal cracking, if people ask me, I call it alternative computer art scene. It’s all about art nowadays because the demos that people do on PCs they are real time video art running on a computer.

Adrian Bye: That’s a good way to say it. For some people that may seem odd. We were doing things that were very advanced back in the day and this was a bunch of 13 year-olds to 18 year-olds and we spent every second of every minute of the day that we could on this stuff. I mean that is what it was for me. How was it for you?

Romeo Knight: I think I got a C64 when I was 14 and I started making music on the C64 already. I wasn’t connected to any scene at all at that time when I changed to the Amiga because I was fascinated by computers in general, not by computers but by computer games, not by the tech. Also tried to learn to sampler but I failed obviously. It was the fascination.

Adrian Bye: So you then went off into the direction of making music? What was it that started you in that direction?

Romeo Knight: That was easy. I was into music before, the usual way. You have parents who tell you to learn an instrument and you choose a classical instrument because your friends have to do it, too. I played the clarinet for quite a long time, played in a classical orchestra and even a local youth orchestra. When you are a teenager you’re interested in music of course. I had an older sister and was listening to her vinyls, these black discs, and she was Depeche Mode fan, English electronic pop like that, so I was interested in synthesizer music in general. The first thing I did with the C64 was to try to get some synth sounds out of it.

Adrian Bye: There were guys on the C64, like Martin Galway for example, and he did some really sophisticated stuff with music on the C64. I don’t know exactly what they did but they were combining both musical ability and programming ability to be able to extract more sound that it was normally capable of.

Romeo Knight: Right.

Adrian Bye: Did you ever get into anything like that?

Romeo Knight: Of course. Because I was a computer nerd at this time when I came back from school I didn’t put on any pop music. I was starting the computer and was listening to the best tunes from the C64 games.

Adrian Bye: I did that too.

Romeo Knight: That was the greatest music for me at that time.

Adrian Bye: Like ‘Thing on a spring’, you remember that?

Romeo Knight: Of course. You mentioned Martin Galway. For me the biggest hero of them all is of course Rob Hubbard. He did it for me because, I mean I loved Martin Galway too, but for me he managed to create such sophisticated music from the synthesizer chip in the C64. I was really blown away. I mean he did such extreme stuff because he was a great programmer and a great musician at the same time.

Adrian Bye: And you had to be.

Romeo Knight: Yes. Unless you got the sound monitor by Chris Huelsbeck. He was the next one. He came a little bit later. I talked to Chris Huelsbeck just a few days ago. There was a paperback magazine that was called ’64er’, that was the only C64 magazine at that time. They had a music competition and he won that music competition. His winning song was called ‘Shades’. Because they didn’t put discs with the magazines back in the days, they had a hacks listing of this piece of music in the actual magazine. And I remember I was hacking all this listing inside the computer with the help of my mum. That was hours of work just to listen to a 3-minute piece of SID music. But it was worth every minute because it was a great piece of music.  

Adrian Bye: When Rob Hubbard did his advanced music back in the days of the Commodore 64 I didn’t realize that you had to be a programmer and a musician to be good. I was just reading about this a few months ago. Can you tell me what kind of things you had to do on the Commodore 64 to be both to be able to do it well? This is of course before Soundtrack. What was required?

Romeo Knight: I’m not a programmer, so I cannot really give a good answer to this question, but you needed to know the hardware. You needed to know what the SID chip was capable of. So you actually had to explore stuff on it. When you get a computer there is normally a manual with all the stuff you can do with it, even for a programmer. And you could do things that nobody knew before. If you used different registers in a different way, you were putting in parameters that weren’t actually allowed to put in. And you could really create weird effects by doing so.

Adrian Bye: And there are probably still a lot of things that haven’t been figured out even twenty years later.

Romeo Knight: Yes, there are extreme people who are doing SID music up till today and if you listen to it you wouldn’t believe this is still only the C64 with three mono channels. That’s really extreme. But that’s the magic about it, that’s the magic of the demo scene in general. There are people that explore even further than any guy would imagine and do virtually impossible things.

Adrian Bye: And that’s what made it special.

Romeo Knight. Yes, right.

Adrian Bye: Where did you go in terms of your career with all of this?

Romeo Knight: There was a break when making music on the computer platform was not  enough for me anymore. I even trashed all the computers. I didn’t have a computer at that time. I really wanted to make handmade music. I had started to play the guitar a few years before and the next years I was playing in bands. And I was very satisfied with it. I made this cut and wasn’t doing anything for the demo scene for a very long time. When the PC came out what we now call the retro, old school computer platforms were over. What I knew from that time was if I’m doing a job for a living it should be something at least connected to music. I knew I couldn’t make a living from making music because I was just not good enough for the real life with it.

Adrian Bye: Why would you say that? You were one of the absolute best on the Amiga.

Romeo Knight: Yes, but that’s a niche. But for the real world the computer scene didn’t even exist. And I have to live in the real world and there was nothing I could have done with it.  

Adrian Bye: Obviously they didn’t know who you were. Did you find that what you had done on the Amiga didn’t transfer across very easily? Is this what you’re saying?

Romeo Knight: Yes. At least that was my impression.

Adrian Bye: Like today, it would have. You would have ended up working at a game company

Romeo Knight: Well, today it has, because for some reason a lot of people from those times are now in some high-profile positions in some companies and they remember me and say, oh that was the guy who made the music, so lets ask him.

Adrian Bye: So that generates a lot of business for you?

Romeo Knight: No, not really. I’m still not making a living from making music. I make some money with it, but that’s really a small part of it. If you want to deal with music, make money with music but not be a musician, what’s the next possibility? Be an audio engineer. That’s what I did. I did some SAE diploma, it’s like some audio engineering school all over the world, a private school. Then I started as a trainee in a studio, and that’s now almost 18 years ago.

Adrian Bye: So now you’re an audio engineer?

Romeo Knight: Right. Thirteen years ago, I and a few colleagues did our own business, running a studio, not for making music but for producing commercials, voice recording stuff, post-production. We do a lot of TV ads, and you can watch them on German TV every day. So that’s where you can still make some money.

Just to give the story an end, I was contacted in 2007 by another demo group called ‘Brainstorm’ and they asked me if I’m still active. I wasn’t really, but I was fiddling around in the studio with sounds, with music. They asked me to do a track for a demo and I said, why not? That was the start of getting back into the demoscene and nowadays I’m an active part of it.   

Adrian Bye: You are back in the demoscene?

Romeo Knight: Yes, more than ever. I’m usually at the biggest events, too. I thought you’d know that.

Adrian Bye: No, I’m not part of the community anymore. That’s something I left a long time ago.

Romeo Knight: I’m now a big part again, I’m at almost any big demoscene event in the vicinity.    And that’s so much fun. I got a lot of new friends and people are so great because they are so fun, creative folks. There is really a lot of stuff going on still. What I like so much about it is it’s really about art. Doing a computer demo is a piece of art. Nowadays you can do real music, you can use any instrument you want, you are not limited to this system you’re doing your stuff on. I even did some live concerts with other gifted musicians from the demo scene at such events. That’s really huge fun.

Adrian Bye: I think one of the things that made all of this special was everything that we did was about play. And I think that is what you’re getting at too when you make music for yourself, it’s about play rather than work.  

Romeo Knight: Yes, of course. That’s why I’m not so unhappy that I’m only getting a small amount of money out of the music itself. In that way I can stay free in my mind regarding music. I know from other professional musicians around me that can be quite a torture if all your own music is only centered about some marketing ideas, for example, or stuff someone else made up.

Adrian Bye: Makes sense. Is there anything else you want to tell us that we haven’t covered?

Romeo Knight: Well, most of it was covered. The last part was quite important for me because I’m really happy to be in the demo scene again.

Adrian Bye: Eike, thank you very much for doing the interview.

Romeo Knight: Thank you, too. It was a pleasure.

Personal Info

Sports Teams:Stanford Cardinals, Sao Paulo soccer team

Most Influenced By:Sergei Brin, Larry Page

Website: http://www.dgf.com.br

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

?Adrian Bye: Today I’m here with Patrick Arippol who is from DGF Investments in Sao Paulo in Brazil. Patrick, thanks and welcome.

Patrick Arippol: Pleasure to be here. Thank you.

Adrian Bye: So, Patrick, we just spoke a little bit before the interview started. You have an accent and I’m presuming you are Brazilian. Maybe can you tell us a little bit about who you are and where you’re from?

Patrick Arippol: I was born and raised in Brazil, I guess that is the origin of my accent. My mother being from the US ended up leading me to want to start my career there, which I did at Seer Technologies. Then I worked with strategy consulting for IT. At that point I took the plan to do startups down in Brazil. I did that from the pre-bubble years to the post-bubble years, which was an interesting time frame. After that I decided let me see how things work in Silicon Valley, which took me to the Valley in 2002. I did my MBA, launched the startup and at that point I decided to start working with investments. That led me to launch a fund, which I led from 2007 to 2010. Then I came back to Brazil and joined the folks here in DGF in the early stage practice, which I have been doing since. I’ve lived in different countries, worked a bit in the US, Brazil, Argentina, did some projects in India in the early stage of my career. I guess I call myself a Silicon Valley/Brazilian entrepreneur.

Adrian Bye: Why did you move to Sao Paulo?

Patrick Arippol: In one way the market here is very green. The market matured a lot since my first startup experience here ten years ago, and that is very exciting. The market is more mature, is more willing to buy, different products, technologies. So you are able to find critical mass in some areas that we were not able to find ten years earlier. I guess having learned a few things over there in the Valley there is a lot that can be translated down to here. Obviously a lot of things just can’t, they don’t make sense, but it’s easier to make a very solid impact down here than it might be in Silicon Valley. Especially joining a bit both worlds, the skills and networks from the Valley to invest in tech with a very deep down establishment within the startup environment, which is DGF. They’ve been doing investments here for over ten years, which for Brazil is a long time. Joining the best from both worlds ended up being a very interesting combination.

Adrian Bye: Tell us a bit about the startup scene in Brazil. Maybe if you could just describe who do you see as the leading companies and what you see is going on?

Patrick Arippol: The market as a whole right now is facing a very exciting moment. The number of Brazilians going out there to launch a company or to incubate a company and bring it down here or some variation of that is very large. There is a volume of exchange of insights and maturation of the local entrepreneurs that is very substantial. But how does that translate into what is happening now in Brazil? I guess many would agree that there was a wave of entrepreneurs and series A rounds and Angel rounds and tech startups, especially from mid 2001 to mid 2012. That wave to an extent has receded. Right now a few of those companies are up and running, they have critical mass. A few of those have closed down or some of those sectors are consolidating some of the players. Right now it’s more a matter of resilience for investors and startups. This is a time where the investors that are here for the long haul really stand out, and the entrepreneurs that are really here seriously and are not doing entrepreneurship for the romantic reasons. They know it’s tough, it’s not easy, it’s challenging. We are separating the serious entrepreneurs and the serious investors from a few other ones that were just trying.

Adrian Bye: That’s interesting. So is the internet environment in Brazil at the moment not as strong as it was say a year ago, or two years ago?    

Patrick Arippol: I won’t say it’s not as strong. I’d say revenue-wise it’s as strong or stronger. It’s just a matter of that there were too many bets. There are a few areas in particular in eCommerce and a few other sectors where there were two, three, four, five investments in the same pieces, and this is not a market that is large enough to have five, six success cases in the same category of eCommerce.  

Adrian Bye: What are some of the startups then that you guys have worked with?

Patrick Arippol: We have one company for example which was the first investment from this fund, which is called Ingresse. It’s basically a technology company to lever the sales of tickets online through new technology such a social networks, mobile phones and so forth. Our thesis was based on the concept that from all products that you can sell online an event is really the most social product because you want to know who’s going to be at the event. If it’s a business event who else is going to be there that you want to meet? If it’s an entertainment event, is your ex-girlfriend going to be there if you want to avoid her or if you want to find her? All this information is relevant. In essence it levers from these new technologies and we think there’s a great inflexion point in Brazil. One of the differences to here is even though the number of social network users and mobile phone users is smaller than the US, they are more avid users. We think it’s a thesis that Brazil could allow for the development of a technology even beyond what we find that are comparable to the US and other countries. So we’ve backed an entrepreneur. He is relatively young, he’s doing extremely well so far. That’s one company. We have another one which is a business intelligence solution for health care. We are very excited about the bets we’re making. Of course we know there will be a lot of challenges before they reach what we think they’re able to reach.

We think we also understand how the market will buy the technology, and it’s very different here than the sales process that takes place in the US. So of course part of our thesis and a lot of the things that we invest in we think very carefully about customer acquisition cost versus lifetime value. Usually the customer acquisition strategies are very different from what we see the US players doing in the US market. All of those things of course we have to make sure are adapted.

Adrian Bye: What do you see happening in the Brazilian market over the next couple of years?

Patrick Arippol: For sure, the market has been evolving and I think is going to continue to evolve quite rapidly. The speed in which things have been picking up in the last few years has been amazing. I think one of the adjustment aspects that’s going to take place is that a few investors and VCs have made one or two deals to test the waters. A few of those are going to say great, go on, build a fund, etc. A few other ones are going to say you know what, it’s a little more difficult, or these few investments didn’t work out. So it’s going to be some self-selection I guess. And this applies to both investors and a few entrepreneurs/corporate development arms. You have a few tech companies based out of the US, Europe, Asia, that have looked here and a few of them are going to follow through and invest and do acquisitions. A few of them might wait for different times. So it’s just a phase in which it’s going to be some adjustments but at the same time I really think that one of the things that Brazil is really lacking right now is a lot more great success stories. I have a company that did extremely well, that went from zero to a hundred to five hundred very rapidly and effectively and dominated a market locally and even in a second stage, globally. I think there is a good amount of chance of there being one or two cases like this in the next five or so years. And hopefully in the next ten years we will have a few more. So I think a good outcome and an expected outcome in my viewpoint is that we’re going to have a few of these successes.

Adrian Bye: In the short-term, are you somewhat bearish on how Brazil is doing for internet?

Patrick Arippol: No, not at all. There is a lot to be optimistic about, but you can’t forget the fundamentals. You can’t forget the floor upon which you’re standing. I think that a wave happened a bit in 2010, 2011. And now, that’s being adjusted. So the adjustment that was already happening most of it has already played itself out. I think actually some very good investments are going to happen in the next two years. Companies that haven’t been backed yet are going to maybe get some funding. I think we’re going to see a lot happening in the next few years.

Adrian Bye: What do you think will be the stand-out internet companies in Brazil?  

Patrick Arippol: That’s a good question. In the eCommerce area Dafiti and Netshoes. And probably a few more will be well established. There is also another stand-out company which is MercadoLivre, which had its very interesting relationship with ebay. It’s doing interesting things. It’s become agile, it’s remained agile and it’s looking at startup opportunities that can leverage its technology base. So on the large company scale, I think those are a few of them. On the technology side, there are five, six players that are well placed in the market, and it’s a very green market. You have a few large retailers, you have a few very large product companies in different segments. By and large, the industry is more consolidated. So if you’re a startup you try to sell technology or you try to sell ad technology or something like that to those players. You have to think very carefully about your strategy.

Adrian Bye: Tell us a little bit about your particular firm. You went out and raised some funds. How did all of that work?  

Patrick Arippol: In 2010 I went back to Brazil. I had known the guys from here from one of my fund-raising processes when I was raising for the companies that I launched in Silicon Valley actually. And we stayed in touch. So for about five, six years we spoke with each other. When I came to Brazil, I spoke with them and vice versa when they went to Silicon Valley. At that point when we were in one of these networking meetings when I had decided to come down to Brazil, I did two weeks of really trying to figure out what was going on in Brazil. What of it is sustainable, what’s not? In these conversations we ended up talking and they wanted somebody to run their early stage practice. DGF has three practice areas, the core of it is growth equity. They have funds which I guess in Brazil we call them growth equity, investing checks from let’s say 10 million US to about 30 million US, which could be either a Series B, Series C, or could also be an investment in a more mature company. Their core of DGF is really the growth equity and early-stage investing is also a good way for any firm to stay in touch and stay on top of the new trends etc. and all the synergies between that and early stages of practice, I came in to round that practice. Basically, they had started to getting commitments for this fund and I came in and ran the rest of the fundraising process. We closed the fund and we launched in January of 2012. So we had a delay, not for the fund raising, but for the regulatory aspects to get the fund up in the air.    

Adrian Bye: People look at Brazil and say it’s a Third World country. But you have something like ten billionaires living down there, haven’t you?

Patrick Arippol: Yes, there are some very successful entrepreneurs. One group, I think they are called 3G, which is three very successful entrepreneurs in Brazil. The InBev Group, which acquired Anheuser-Busch, which is now I think one of the largest beer companies in the world, they were driven by these Brazilian entrepreneurs. They also, as a group, are doing investments in the US. They acquired Burger King and now Heinz Ketchup. So there are many well-to-do entrepreneurs, yes. Not so much in the technology areas, but we were hoping that will change in the next few years.

Adrian Bye: Is there anything you want to tell us that we haven’t already discussed?

Patrick Arippol: Yes, just a general point, Adrian, if I may. I think the Brazilian market is a great market, it has critical mass, it’s gone through a lot of maturity in the last few years. It remains a very interesting market place. But right now it’s my thesis that it will be successful in terms of startups, in terms of investments it will be a little bit more nuanced. So it’s more of a mixture between what’s out of Silicon Valley, Asia, Europe makes sense, proves a working model, and what works or doesn’t work down here in Latin America more broadly and what exactly you’d have to adjust. I think it’s a more nuanced market. It’s a great time if you can find the way to join that global insight with the local insights, and I think from that we will see a lot of great successes in the next few years.  

Adrian Bye: Awesome. Patrick, thank you very much for the interview.

Patrick Arippol: Thank you Adrian. It was a pleasure.

Personal Info

Favourite Books:

• Cloud Atlas by Doug Mitchell
• Judgment Under Uncertainty: Heuristics and Biases by Daniel Kahneman

Most Influenced By:Sheryl Sandberg, Meg Donahue

Twitter: http://twitter.com/hayleybay

Website: http://birchbox.com

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Hayley from Birchbox. Birchbox is one of the top fashion startups and I’m very glad to have you here. Hayley, thanks for joining us.

Hayley Barna: Thanks for having me.

Adrian Bye: Hayley, tell us about who you are and where you come from. Birchbox sounds like a pretty amazing company.

Hayley Barna: I’m co-founder of Birchbox, a business that I started with a friend from corporate business club about three years ago. Before business school I was working in management consulting at Bain & Company in New York and got great exposure to a wide range of industries, everything from telecoms, to retailers, to financial services. I was lucky enough to work in consulting between 2005 and 2008 when the economy was growing, and so it was growth strategy type of stuff. I’m originally from the New York area.

Adrian Bye: I saw part of an interview that you did with Chris Dixon. You were talking about some of the processes that you used to start Birchbox. You were specifically talking about using Lean. I’d love to hear how you guys came up with the idea of Birchbox and then how you applied Lean. It sounds as if you really nailed it.

Hayley Barna: We came up with the idea for Birchbox influenced by a lot of different things. One was our own experience as consumers; seeing that a lot of categories were shifting online pretty effectively but realizing that the beauty category, one that you really have to touch, try and feel in order to make a new purchase decision, hadn’t shifted online; also seeing the the group buying, the flash sales, a lot of the innovations in online retail were discount driven; and thinking there was a better way to do that, specifically for beauty. So our vision was to create a discovery commerce platform, a way for brands to get their products in the hands of customers that would value it, and to help customers discover new products and new brands that they would love.

Adrian Bye: So you were actually taking the Groupon model and applying it to beauty and the fashion?

Hayley Barna: Not exactly. The Groupon model is quite different. We’re focused on new customer acquisitions. At the beginning of a product life cycle the beauty industry is really driven by product launches, by changing trends. And there was this built-in industry behavior of sampling. But that was traditionally done as a loyalty program for existing customers. We saw an opportunity to create an online platform that could sample to new customers in a targeted and ROI-efficient manner. Getting customers to opt in to this experience, to pay $10 and say: ‘Birchbox, please send me a selection of high-end products tailored to me and my needs and preferences’; and through that help them discover new things that they wouldn’t have considered otherwise and for the brand help them find new customers and get a great return on investment for their sampling dollars.

Adrian Bye: So how did you come up with the idea?

Hayley Barna: The kernel of idea was sending a personalized assortment of products to a customer’s home every month. Definitely influenced by the idea of a magazine, being able to get a physical product into customers’ homes that would really get their attention. Then we realized that, just like a magazine, being able to put those products in contact to tell customers why they’re great, how to get most out of them would be important. We do that through writing editorial articles, having how-to videos on our site. And then lastly, the third piece of the try-learn-buy model is the fact that we sell full-size versions of the products that we sample. That’s important for the customer experience to have that happen seamlessly, but also really essential for a brand partner. And we needed that to track the conversion rate of our sampling effort.

Adrian Bye: The initial coming up with the idea, is this something that you did analytically figure out through looking at lots of different business ideas? Or was this something that you wanted to do yourself?

Hayley Barna: The idea really found us. Katie and I were in business school. We weren’t one of the students who were dead set on finding an idea before we graduated. We just started playing around with this idea of product discovery through targeted trial, and we couldn’t stop thinking about it. And then we had a decision point: we can write a business plan, like a word document about this, or we can get out there in the world and see if it would actually work. The latter just sounded way more fun. So we quickly went from brainstorming to actually contacting beauty brands and asking them to purchase a place in a beta test.

Adrian Bye: How many brands did you start with?

Hayley Barna: Our beta test was pretty limited in scope. We wanted to send out two months of Birchboxes to 200 customers. Birchboxes have four to six products in them. So we needed eight brands to give us 200 samples each in order to get the beta test started.

Adrian Bye: So you had the idea, you guys couldn’t stop thinking about it, and then you said okay, we’re going to do a test of eight products to 200 people to see if it works. Then you went and found eight brands that were willing to give you enough products and that was the start of your test. Is that how it came together?

Hayley Barna: Exactly. We are a platform so we could have started on the customer side or on the brand side. But it was really obvious to us, and still is, that the success of our products depends on having great brands and great samples. So we started there, getting the commitments from these eight beauty brands. Then we built the site and then we went out and got customers.

Adrian Bye: Had that failed and you hadn’t been able to get those companies on board you would have said, okay, maybe this idea is not the right one?

Hayley Barna: Yes. That was the point of the beta, a sort of a proof of contest. We needed to prove three things essentially. The first was: will brands want to work with us? Do they think that being able to shift beauty product sales online is a pain point? Our first meetings confirmed that. We were in the right place at the right time. They were seeing the shift and wanted to have a better way, a better partner to be doing it with and we were like answers for them. The second thing we were testing was: Will consumers pay for samples? As I said before, sampling was traditionally done as a royalty program, as a free gift with purchase. Our idea that customers would be willing to pay for a surprise set of targeted samples was a big behavioral change and something that we needed to prove. And lastly, in terms of making the economics in the business model work was testing whether if we send these samples to the customers, would they turn around and buy four, five versions of the products that they sampled? Those were the three things we tested in the beta test.

Adrian Bye: Why did you build the site? You start with the brands, why not just pass around flyers at the university to get 200 signups and test it that way?

Hayley Barna: I think a few reasons. The first was that we were committed to having an unbiased panel of customers for a test. So we made sure that we addressed people that didn’t know us, that weren’t in the bubble of being on campus. That was just in terms of the customer side. We had a big vision from the beginning that what we were building was the best place to buy beauty products online. And that would be made possible through personalization based on profile and behavioral data. That we would get both explicitly by our customers telling us what they wanted but also implicitly through their browsing behavior and their purchase behavior. And a website was necessary for that, even in the beginning.

Adrian Bye: So you built the site and drove a bunch of signups through Google and Facebook?

Hayley Barna: We used some sort of friends-of-friends method. My co-founder and myself each made a list of twenty people we knew in different stages of their lives and different cities around the country. We sent those friends an email saying, ‘We’re testing something and we don’t want you to sign up, but we would really love if you’d forward it to any distribution list that you’re on or to your friends that you think might be interested.’ We used MailChimp and were able to see that those forty emails turned into thousands of opens and we were able to get that 200 customers pretty quickly.

Adrian Bye: Wow, that’s very smart. I’ve never heard of anyone doing it that way before.

Hayley Barna: Yes, it worked well for us. I think part of it was that we were really open, like this is a test, this is something new, and by signing up to this you are helping us figure out if this new idea will work.

Adrian Bye: So you had 200 signups, you shipped 2 months’ worth of Birchbox to people. And then what happened?

Hayley Barna: We looked to see how customers would react. We were checking conversion rates. Were people logging back into the site, read the content we had written about the products and pressing those buy-buttons to get full-size versions? We were really happy with the conversion rate that we saw, We were able to package up that 2 months’ worth of data in those learnings and go back to our brand partners and show them that the pilot test that we had run worked well and that we were planning on graduating from Harvard Business School without jobs in order to launch Birchbox on full scale. And that’s what we did.

Adrian Bye: Did you pay the partners for the samples?

Hayley Barna: No, we did not, and that’s still how it works. Sampling is an important part of how the beauty industry does spend their marketing expense. Basically we were telling them to take that existing marketing expense and shift it to Birchbox and we’ll get you a higher return. We’ll be able to get more impressions for you, we’ll be able to generate more sales, both through our shop on Birchbox, but also through other channels.

Adrian Bye: So there were actually three key components to your model that you had to validate, right? Would the companies give samples? Would consumers be interested? And then, would there be a good enough conversion rate on the samples to make it worthwhile?

Hayley Barna: Exactly. If we’re doing the right things, the brands and the customers will be happy. The customers will buy more products, the brands will see a better ROI, they’ll give us more samples. That also helps us scale, and as we scale, we are better able to target those samples based on customers’ profiles and their past behavior. And it just started to snowball from there.

Adrian Bye: Are you able to talk about conversion rates that you see?

Hayley Barna: Not in detail, but we have been able to scale significantly and I think our last published figure was that we were well over 300,000 subscribers. That’s a lot of samples. So the brands are very happy with the return that we are able to get them.

Adrian Bye: That means every month there are at least 300,000 subscribers that are paying you $10 a month to be part of this program, which I guess effectively covers the shipping and handling on your side. Maybe you get a little bit of money out of that. Do you make commissions then from the brands when people come and buy stuff?

Hayley Barna: Our two main revenue chains are the subscription site and then we are retailers for the full-size products. So when we sample something we take inventory of that product and we work hard for the brands, but also work hard for ourselves to make that conversion happen. So it’s not commission, it’s retailer.

Adrian Bye: I guess you can very easily do some sort of a test to see if something is going to work and then you have your conversion rate and then you can go and do it?

Hayley Barna: Exactly, we do that pretty frequently. We sample a smaller amount of a product and then we see which demographic converted higher. Then next time we sample a lot more and will target it appropriately so that we are sending it to the people most likely to love it and to buy it.

Adrian Bye: Do brands really like what you’re doing?

Hayley Barna: Yes. We have over 400 brand partners and we create very deep relationships with our brand partners. Some of them have grown from being relatively small to being much, much larger through Birchbox. It’s almost like a consultative relationship where they really go to us to ask questions about trends, about packaging, about what we’re seeing out there in our increasingly large customer base.

Adrian Bye: I’m curious how you’re finding the tech space. I mean, there are a lot of dorky guys around and you have to deal with dorky guys and manage them, especially in a fast growing company. That might be quite challenging sometimes.

Hayley Barna: Not an issue for us. I have a long history of really enjoying working with dorky guys. I went to Harvard College Undergraduate and I was probably one in ten women who took the intro to computer science class. I’ve never shied away from that sort of environment. But in the US office we have about 120 full-time employees and we’re close to 80% female. Not on purpose, but our tech team is more female than an average tech team. Our CTO is female, she has a PhD from Carnegie Mellon. And we have a lot of really, really smart female engineers and product managers working at Birchbox as well.

Adrian Bye: That’s got to be an unusual internet company environment. I’m surprised I haven’t really seen that discussed around on the net.

Hayley Barna: We’re really proud of it. You might think they may work here because they like makeup, but they are just excited to be working on really interesting technical challenges and problems. And they created a really great culture on the tech team specifically where they can really have ownership over the features and the projects that they are working on.

Adrian Bye: Ok. Hayley, thanks for doing the interview.

Hayley Barna: Thank you, that was fun.

Personal Info

Sports Teams:Corinthians

Favourite Books:

• 1984 by George Orwell
• The Hitchhiker’s Guide to the Galaxy by Douglas Adams
• The Code Book by Simon Singh

Most Influenced By:Paul Graham, Romero Rodrigues,

Twitter: http://twitter.com/marcogomes

Personal Blog: http://marcogomes.com

Website: http://boo-box.com

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Marco Gomes, the founder of boo-box, which is a Brazilian advertising company. Marco, thanks for joining us.

Marco Gomes: Thank you very much for the opportunity.

Adrian Bye: Do you want to tell us a little bit about you, where you’re from in Brazil and your life in general before we talk about business?

Marco Gomes: I’m from Brasilia, the capital of Brazil. I lived there until I was 20. When I was 20 I made this prototype of a social media advertising company and moved to Sao Paulo to create my company. I did computer science at the Brasilia Federal University, called UnB, but I dropped out, so I don’t have a degree. I did three years of computer science but I did an executive education at Stanford University in California on strategic marketing management in 2011, after I started my company. That’s my academic preparation, it’s not even a degree. I’m a dropout, I don’t have a degree, and that’s about it. I’m from a small city 40 km from Brasilia. I grew up and lived there in a lower middle-class community with 200,000 people until I was 20 years old and moved to Sao Paulo, probably the biggest city in the southern hemisphere. It was kind of a shock to go from a small city with 200,000 people to one with 18 million people.

Adrian Bye: Did you move because of business?

Marco Gomes: Yes, I moved to start my company. All the advertising business in Brazil is centralized here in Sao Paulo. I needed to be very close to the advertising agencies and advertisers in Brazil. I was 20 years old, no wife, no kids, so it was pretty easy for me to move anywhere. So I moved and started my company with a co-founder. I like Sao Paulo a lot, I think Sao Paulo is the best place to work, make business and grow professionally in Brazil. We do have chaotic traffic, we do have very bad public policies, do have lots of urban problems. But you need to learn to live with that if your objective is to grow professionally and to get very good business deals. Sao Paulo is the place if you are in Brazil.

Adrian Bye: So tell us a little bit about your company.

Marco Gomes: boo-box is a social media ad network. We have a network of 430,000 websites that use our tools to earn money with advertising. So our advertising products, like link shorteners that make you earn money with advertisers, advertising spaces like standard IAB advertising space like banners and super banners and that kind of stuff. And we help these 430,000 websites to earn money through advertising. On the other hand we help advertisers to be present on this social media audience. In Brazil, we have 95 million internet users, and 97% of them use social tools. So we are very much a social culture

Adrian Bye: Your company does brokering effectively for just brands, or is it brands and direct response companies?

Marco Gomes: We do just branding advertising and we do it mostly because of our technology. This is not just an intermediary business, it’s not like you buy cheap and you sell expensive. We have very strong and complex technologies to make behavioral targeting. So we do very specific targeting based on each individual that is accessing our network of websites, and based on the behavior of these people we display ads for them. We have the behavioral profiles of 60 million people of the 90 million of the Brazilian internet users. With these behavioral profiles we can display better advertising. So we do know how the person behaves online, what he consumes, which kind of content he likes better, which kind of content he interacts more, which kind of computer he uses, which kind of device and screen size and internet connection. Our segmentation algorithms are very good and we have 60 million people on our hand. That’s a very large number of people we can target with advertisement, and all of it completely private, completely anonymous. We don’t have pictures of people or names, so it’s completely safe for the audience and completely effective for the advertiser.

Adrian Bye: Let’s talk about the side of a brand. Let’s say I’m representing McDonald’s and I’m coming to you for the first time in Brazil and I want to do some media. How’s that going to work and how does that deal come together?

Marco Gomes: The first thing is, you as an advertiser can’t buy me directly here in Brazil. That’s against the market standards. You need to go through an advertising agency. The advertising agency is the only type of business that can buy media online or anywhere in a magazine.

Adrian Bye: There is a law?

Marco Gomes: Standard pratices of the market. That is to keep the advertising landscape with high quality and with less attrition. In Brazil we don’t have the advertising campaigns that you have in the United States, like brands comparing themselves with other brands, or Ford attacking Chevrolet or GM. That doesn’t exist here in Brazil. If a brand like Ford says in a TV ad or an internet ad that their car is better than the Chevrolet, that gets very bad mood in the market. Not only in the advertising market, but also on the consumers’ side. The consumer sees that as aggressive, because it’s not part of our culture. That happens also because of the advertising agencies that buy media. They control everything that goes to the media, to the advertising spaces.

Adrian Bye: So let’s say, I’m McDonald’s, I come to you, I want to run some advertising in Brazil. How much do I have to pay to get started and how does that work?

Marco Gomes: Our work at boo-box, or any of the media players in Brazil, is not directly with advertisers but with advertising agencies. The advertising agencies do have the control of the media money here in Brazil. My customer is not the advertiser, my customer is the advertising agency.  You have more than 90% of the media money in Brazil in the hands of less than 100 advertising agencies. This is a very small market in terms of players but with lots of concentration of the money. If you bypass the agency and go directly to the advertiser, the advertiser will buy from you one times or two times, but all the advertising agencies will close themselves and you will be out of the market. Some years ago Doubleclick tried to bypass agencies and go directly to advertisers. All advertising agencies closed their businesses with Doubleclick, and Doubleclick needed to go out of the market. That is market dynamics here in Brazil if you are media. You have to be very close and very friendly with the agencies. We are very much aware of that and we played very well. It’s our business to help advertising agencies to create value to the advertisers. We do believe in this business model and we do believe that this is why the Brazilian advertising market is so high quality and respected.

Adrian Bye: What stops the agencies from saying we’re just going to do what boo-box is doing?

Marco Gomes: Their core business is to make creative campaigns, planning and help the advertiser to deliver more value to the customer. Their business is not to talk to 430,000 websites. Most of them are not even companies, so you are not dealing with a company but with a person. It is very complex to pay 30,000 or 40,000 people that are not companies. That kind of operations is not their business. On top of that also the technology. boo-box is a technology company with lots of technology specific developers. We do have a team of 10 people in Argentina working only with innovation and technology. This is too different from the advertising agency business.

Adrian Bye: You have your development team in Argentina?

Marco Gomes: I have two development teams. We have 40 people in Sao Paulo and 10 people in Argentina. From the 40 people in Sao Paulo, eight of them are developers, and I have plus ten developers. So we have 18 people developing products and for structure and technology for boo-box. We are a technology company, a very technology focused company.

Adrian Bye: I’m interested in how the company started.

Marco Gomes: I was working as a computer programmer for an advertising agency in Brazil. I was creating very interactive advertising, like games inside banners and banners that interacted with webcams and microphones, very interactive ads to get the attention of the audience. All the ads that we were creating were awesome and very interactive and were going to the portals, another very singular aspect of our culture. The portals were, but are not anymore, the only thing people did online. People were accessing a portal, a very large website in the morning and were only using that website all day long. That was in 2002, 2003. The behavior of the internet user changed over time, but the advertising didn’t. In 2006, I was 20 years old, I and my friends were using blogs, Google search, social networks, to consume our content online and to get our content. But all the advertising was still old-fashioned and only going to the portals. People like me didn’t even access portals anymore, or portals were only one of the 200 websites that we visited a day. So I thought the money that is on the online internet advertising is all on the portals, but the attention is not. The attention is on the social media, on very small and specific websites. Our advertising should be not on the portals, but on these websites.

So I created a prototype or proposal of doing advertising campaigns not only on one website, but on 200, or 4000 small websites and put it online in December 2006. In January 2007 I sent it to TechCrunch through their online form and they wrote a very good piece about it, saying how these guys in Brazil saw it and nobody in Silicon Valley saw it. So Techcrunch wrote about it and lots of people came to talk with us, lots of people tried to become business partners and clients. This was in 2007. I didn’t knew anything about Venture Capital or anything. I was 20 years old and I only knew how to develop a computer program and websites. So I started learning. I met my co-founder, we started to think about starting a company out of it. From January 2007 to May 2007 we talked about it and I decided to drop out of college, quit my job. I was a tech leader of a team of 15 developers in this big advertising agency. I quit my job, moved to Sao Paulo with no money and started working.

Adrian Bye: But you had a business. 

Marco Gomes: No, I didn’t. I only had a prototype, and no company. I started working on it. We started a company formally in August 2007 when we got the investment. We started the company and got the investment at the same time. After that we spent 18 months to create this technology system. We spent 18 months and two million dollars working on this technology system to display the correct advertising on the correct website. We were not talking about one website or two websites anymore, we were talking about 10,000 websites, 50,000 websites.

Adrian Bye: So your first investment was two million dollars?

Marco Gomes: No, our first investment was $300,000 in August 2007. After that we got some other investments. In November 2010 the company was going very well, we had clients and were growing a lot. Intel saw our product and our company, liked it a lot and made a series A investment. I can’t say how much, but it was a standard series A, a couple of million dollars so we could keep growing our company. We used it mostly to bring more human resources to the team. That was in November 2010. In 2011 we merged with this artificial intelligence company in Argentina and kept growing the company with more experienced professionals from the market. Now we do have 1,500 advertisers historically since 2009 when we started the commercial operations and we do work with the biggest advertisers in the country. We do work with Microsoft, Google, Unilever, Fiat, Volkswagen, Ford, all of the banks. All the biggest advertisers in the country work with boo-box.

Adrian Bye: That’s great. We’re almost out of time. Is there anything that you want to cover that we haven’t discussed?

Marco Gomes: Recently I gave a talk at the UN about creative economy and the importance of independent publishing to democracy. I think that is pretty important because it’s totally related to what we’re doing here with advertising. Why is it important? Independent publishing is what true democracy is because all big media venues like newspapers and TV channels have hidden interests, their own agenda. What they talk about is completely biased by their own interests. But independent publishers are not biased to anything. If they don’t like a car, they write that they don’t like the car. They are not linked to the industry that is doing it. If they don’t like a cell phone or a politician, they will say it. That is very important to democracy, not only on the consumer side, but also in politics. Advertising can provide this independent publishing. If you are independent and you have good advertising services at your disposal, you can earn money with what you are writing. If you get a lot of attention with your independent publishing, some large media group buys you and you start writing to them. With good internet advertising services like boo-box and other places you can keep earning your money, making your living out of it, and you don’t need to sell out your opinion or work. You don’t need to work or write for a large media group. You can keep being independent. And I think that is why the work of boo-box and other similar players on the internet and other places is very important. With the advertising money going from the advertisers to these independent content producers, other countries can get better because you have better content online. Better content online attracts better audience, and better audience attracts more advertising money. And with more advertising money, the publisher can create better and better content, because you have money to travel, to give an interview or to buy a better camera to make a video to produce better content. So this cycle of advertising is pretty important, advertiser money going to independent publishing, independent publisher doing better content, better content driving more audience and more audience driving more advertising money. This is a very strong cycle that can produce a better society, especially here in Brazil.

Adrian Bye: That’s a pretty powerful message. How did they respond to that at the UN?

Marco Gomes: They liked it alot, I got some applause on that. It was good, but I hope it generates two results, not only applause, but also actual changes in the society.  

Adrian Bye: Yes, exactly. That’s a good message.

Marco Gomes: Thank you for the space and the opportunity to share my thoughts on so many things. That’s really good.  

Personal Info

Favourite Books:

• Darwin and the Emergence of Evolutionary Theories of Mind and Behavior by Robert Richards

Most Influenced By:Jan Van Hooff, Hans Kummer, Konrad Lorenz

Personal Blog: http://www.facebook.com/pages/Frans-de-Waal-Public-Page/99206759699

Website: http://www.psychology.emory.edu/nab/dewaal

Relevant Link: http://www.ted.com/talks/frans_de_waal_do_animals_have_morals.html

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Frans De Waal who is one of the world’s foremost researchers in the field of chimpanzees and bonobos and does a lot of research and public discourse about empathy. Thank you very much for joining us.

Frans De Waal: You’re welcome.

Adrian Bye: Can you maybe tell us a little bit about who you are and some of your background?

Frans De Waal: I’m a biologist by training, I’m from the Netherlands originally, but I have lived and worked in the US for over thirty years. At the moment I work at Emory University at the Yerkes Primate Center where we have lots of monkeys and chimpanzees. I work mostly with the chimpanzees.    

Adrian Bye: And you also work with bonobos.

Frans De Waal: I also work with bonobos, but the bonobos are not here. The bonobos we work with are either at zoos or at a sanctuary in the Democratic Republic of the Congo. We don’t have them here at the Primate Center.  

Adrian Bye: You’ve written some books talking about the concept of empathy relating to the aggressive environment with the chimpanzee. More recently you have started talking a lot about the bonobos. The public conversation about empathy and aggression in the chimpanzee environment is a little bit distorted and we need to be thinking more about the bonobos. Maybe you want to talk a little bit about that and what you think is being done incorrectly today.   

Frans De Waal: I’m interested in the issue of empathy. That actually started with my studies on chimpanzees where I found that after fights they approach the individual who had lost the fight and was usually distressed. They approach them, they kiss and embrace them. I heard from developmental psychologists who work on children that the way they test empathy in children is to instruct a family member to cry and then see what children do. And children approach them, touch them and stroke them. I said, if that’s how you test empathy, then that’s something I see regularly in my animals. That’s how I started to make a connection between the behavior of the chimpanzees and expressions of empathy. Then later, when I studied bonobos, I noticed that they are even more empathic than chimpanzees, very gentle and sensitive and much less violent than chimpanzees. And so I got interested in comparing the species as well. It’s an interesting comparison because bonobos and chimpanzees are exactly equally close to us. People tend to favor chimpanzees when they make comparisons with humans, but there is absolutely no reason. Bonobos are just as important.  

Adrian Bye: My understanding is that both are equally genetically related to humans.

Frans De Waal: Recently a paper came out, which is called ‘The Bonobo Genome’. What they found is that genetically bonobos and chimpanzees are exactly equally close to us, with a 98,5 identical DNA.

Adrian Bye: Have you spent a lot of time over in the Congo?

Frans De Waal: No, I do most of my work in captivity. I want to see the details of their behavior and I also have a desire to manipulate the behavior. Experiments where we set up a situation where they can share food or help each other and see under which circumstances are they willing to do that, that sort of research is almost impossible in the field. So I have a different focus than the field workers.   

Adrian Bye: Your basic goal is to apply psychology and psychology testing to chimpanzees and bonobos.

Frans De Waal: With bonobos we mostly do observations at the sanctuary where we are looking at expressions of empathy among bonobos. One of our goals at this point is at that sanctuary where they have a lot of orphans, victims of the bushmeat trade. The young bonobos are confiscated on the markets, brought to the sanctuary and raised by humans. We are comparing those orphans with mother-reared bonobos to see what mother-rearing adds to emotional development. As in humans, it’s extremely important. If you look at the Romanian orphanages, there are a lot of studies on these human orphans, how emotionally disturbed they are and how they have trouble with empathy, conflict resolution and all these skills. We are comparing that in the bonobos to see what the effect is to being an orphan versus being mother-reared.  

Adrian Bye: Do you want to talk about some of your research into IQ and where you think IQ testing is going?

Frans De Waal: We usually don’t call it IQ testing. We test basic cognitive skills, like tool use, or can you learn from others, which is called observational learning or social learning. Do you understand reciprocity, do you understand cooperation? That’s the sort of tests that we do on chimpanzees, on elephants, on bonobos. People do it on children of course. The thing with that kind of research is that you really need to design tests that are suitable to the species. For example, imitation studies where you look if apes ape (funny that that’s the verb we use for imitation), these imitation studies very often used human models. So a human demonstrates to an ape how to open a box. Then you give the box to the ape and you see if the ape does the same thing with it. Now it turns out the apes rarely do the same thing as the human does. They may bang the box or try to open the box in their own way, but they don’t particularly imitate what the human does. People have concluded in the past that that means that the apes don’t have the capacity for imitation. But naturally, you should test them with other chimpanzees because they pay a lot more attention to their own species than to humans. And that’s what we have done. If you do chimp-to-chimp imitation tests, they are actually very good at it. So the problem with all the intelligence tests is that minor details in the methodology may determine what you get out of it. We need to adapt these tests to what suits the species.  

Adrian Bye: I guess it was an extract from your book in the Wall Street Journal about how some of these tests have been redesigned for elephants for example.

Frans De Waal: People would let’s say put food outside the cage area of the elephant and then give the elephant long sticks. They assumed that the elephant would pick up the stick with its trunk and bring the food in like any chimpanzee would do with his hands. But the elephants did nothing with the sticks. The conclusion then was that the elephants don’t know how to use tools until some other investigators did a very different test with elephants. They hung food very high above the enclosure and gave the elephants boxes. Very quickly the elephants would move the boxes under the food and then stand on top. That is also tool use and getting to the food. So the elephants were perfectly capable of understanding tool use, but they were just not very eager to pick up a stick with their trunk. And the reason is probably that their trunk is their smelling organ and as soon as they pick up a stick they shut that off and so they don’t want to do that. So you have to work with the elephant so to speak to get a tool use.    

Adrian Bye: Kind of a controversial area is IQ testing in different areas around the world. We look at IQ levels here in the US and measured below 70 is considered mentally retarded. However, there are racial groups that have measured IQs lower than that, and they’re not.

Frans De Waal: Of course I’m not an IQ tester in humans, but the general assumption is that IQ is quite sensitive to cultural environments, to educational environments. So you would need to control for all of that before you can make any statements about any racial group. In general, we in this field are quite skeptical about what IQ tests do. That’s not the sort of tests that we give to primates. With primates we test very specific capacities, not some general intelligence level.

Adrian Bye: In the world of autism, which is an area I’m pretty interested in, there is some research suggesting that autism may be at the very extreme end of intelligence which can lead to developmental delays. It may actually be that some of these people that are unable to speak in fact have ultra-high intelligence and it’s limiting their ability to develop emotionally as a normal person.     

Frans De Waal: Yes, that’s all possible. I think autism is called a spectrum disorder because we have a whole set of different problems that are sort of pooled together. People are now starting to make finer distinctions. We lumped it all together and say that’s autism, but there is a whole bunch of different things involved.

Adrian Bye: I would imagine you’re familiar with Simon Baron-Cohen’s empathizing-systemizing theory?

Frans De Waal: Yes.

Adrian Bye: It talks about the systematizing drive in autism, the drive to organize things. If this turns out to be correct and the systematizing drive is in fact one of the key measures for intelligence and breakthrough, have you ever thought about or has this ever been done to measure the systematizing drive in animals?

Frans De Waal: No, we don’t really do that. We are just at the point that we are measuring empathy. Simon Baron-Cohen initially believed that autism was a deficit in theory of mind. Theory of mind being that I understand what you know, that I understand your intentions and knowledge from seeing you behave in particular ways and I can understand what you have seen and learned, and so on. Theory of mind is quite a high-level cognitive feat. I’m always skeptical about theory of mind because even the word theory doesn’t fit well. We gather a lot of knowledge about others through bodily sensations and bodily identification with others, which are not theoretical at all. Simon got more skeptical about the theory of mind thing because of course we can detect autism quite a bit earlier than the age at which theory of mind emerges. So he started thinking that it’s maybe a more basic problem than theory of mind. That brought him to empathy.

In my discussions about empathy in animals we get the same process going because when I say chimpanzees have theory of mind people would object to it. But if I say they have empathy they say, oh, that is a more basic feature that you are sensitive to the emotions of others, that you adopt the emotions of others. People can understand that chimpanzees and many other mammals may have that capacity. Your average dog has that capacity to be sensitive to your emotions. So we are now looking at these much more basic features of where do things go wrong in autism, so to speak. Is it sort of a cognitive process, like theory of mind? Or is it more an emotional process, like empathy? And I think we are coming down on the emotional side at this point.

Adrian Bye: Your big topic that you’re well known for is empathy and the connection with the bonobos. Why do you think this isn’t discussed as much and we hear just the violent chimpanzee version how animal life is?

Frans De Waal: There is a long tradition in anthropology to look at human history and human evolution as a sequence of battles that we have won. We wiped out these people, we wiped out those people, we wiped out the Neanderthals. That is how our race has advanced. When it was found that chimpanzees kill each other in the wild when males enter territories of others, all of this clicked together as one story and people would say our ancestors were already like that, chimpanzees are like that, and we are like that. So it’s a very violent scenario of human evolution. When the bonobo was discovered and we learned more about bonobos, the anthropologists really didn’t know what to do with them. They were horrified in a way because all of a sudden there was this very peaceful, hippie-like primate who was exactly equally close to us as the chimpanzee. What can we do with them? Female dominated moreover, that was really problematic for them. The general attitude in anthropology was to marginalize them. Bonobos are actually an off-shoot, a separate branch, they are irrelevant to human evolution, kind of a deviation from the chimpanzee lineage, even though there is no reason to say that. It’s very well possible that the last common ancestor was bonobo-like instead of chimpanzee-like. We really don’t know. But that’s the story they went with. Anthropologists have never been happy with the bonobo. There are a lot of other people who feel that it’s very important that we consider the bonobo, and I’m included in that. I feel since they are equally genetically close to us as the chimpanzee, and as we don’t know what the last common ancestor looked like, we need to take them very seriously. I think human men have a lot in common with chimpanzee males, because we are very political, power-oriented, coalition-formation, we men can be quite violent. I think the chimpanzee is absolutely relevant to the human story, but at the same time I also want to consider the bonobo. The bonobo is sexier (literally) and more empathic, and these are very important features of the human species. I usually like to consider both and think we have a little bit of both.

When the first studies on human empathy were done by female scientists, people didn’t take it seriously. They said that’s a topic for women magazines, not for scientific journals. Now there’s a lot of serious neuroscience going on on empathy in humans and it’s taken very seriously as a very important capacity. I think men have always been uncomfortable with emotions and have pushed that to the side, thinking that rationality is the more important part to look at. I’ve always felt that empathy was an important characteristic.

Adrian Bye: What are some of the reactions that you get for your work?

Frans De Waal: I think the resistance for using the word empathy in animals has largely disappeared. When I started doing this in the mid-nineties people were resisting it because they had a very cognitive interpretation of empathy. They thought empathy was the same as theory of mind, that I can understand your situation. They had a very cognitive view. If that’s your view then your average dog has no empathy. But if you think at the emotional level, understanding the emotions of others, feeling the emotions of others, being affected by the distress of others or the happiness of others; if you take that broad definition of being emotionally affected by others then of course people can see my dog has empathy too. And I think that’s where we now are. A lot of people can understand that all the mammals have probably some level of empathy going on. The more complex forms where I understand your perspective, those are probably limited to some large-brained animals, like elephants, apes and humans. So they are probably much more limited but the general feature is found in all animals.   

Adrian Bye: Awesome. Thank you very much for doing the interview.   

Personal Info

Sports Teams:Boston Red Sox, Celtics, 49′ers

Favourite Books:

• Atlas Shrugged by Ayn Rand
• Fountainhead by Ayn Rand

Most Influenced By:Ayn Rand, Steve Jobs, John Allison

Twitter: http://twitter.com/yaronbrook

Personal Blog: http://capitalism.aynrand.org

Website: http://aynrand.org

Relevant Link: http://www.facebook.com/ybrook

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Yaron Brook who is from the Ayn Rand Institute. Yaron, thanks and welcome.

Yaron Brook: My pleasure.

Adrian Bye: Can you tell us a little bit about your background and where you came from?

Yaron Brook: Sure. I was born and raised in Israel, served in the Israeli military, got my undergraduate degree over in Israel. I moved to the United States in 1987, got my MBA and then my PhD in finance. I was a finance professor for seven years and then took this job at the Ayn Rand Institute and have been president and executive director since 2000.

Adrian Bye: You grew up in Israel?

Yaron Brook: I grew up Jewish, I’m Jewish ethnically I guess, culturally to some extent, not religious.

Adrian Bye: Tell us about what you do at the Ayn Rand Institute.

Yaron Brook: The Institute itself exists to promote Ayn Rand’s ideas. It exists to bring Ayn Rand’s ideas into the culture, to have a positive impact on the world, to bring about a culture of reason, of self-interest and ultimately, capitalism. I both run the institute as the CEO in terms of the organization – we have over 15 employees and a budget in excess of ten million dollars annually – and I’m the prime spokesman for the institute. I spend a lot of my time doing interviews like this, but also speaking in front of student groups, business groups, intellectual groups, writing. I have a new book that came out in September called ‘Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government’. So, in a sense, I have an administrative responsibility of running the institute, organizing and raising money for it, and the responsibility as public spokesman, intellectual, writer, speaker and advocate for these ideas.

Adrian Bye: You are a smart guy. Anyone who’s really gotten into Ayn Rand understands intellectually how to do business and how to get things done. You don’t need to do this, you could be off working your way being a billionaire rather than what you’re doing. So why do this?

Yaron Brook: Because I love it. It’s a lot of fun and I truly enjoy what I do. And because I care about the world I live in. I care about the world in which we live, about my kids. I want to live in a better world, I want my kids to live in a better world. And I want good people to live in a better world. I benefit from it, everybody that I care about would benefit from that. I’m a fighter, I want to fight for that better world. I’m passionate about the ideas, about the philosophy, I’m passionate about conveying those ideas, conveying that philosophy. And I enjoy the process of teaching and communicating with people. I get a kick out of being able to stimulate thought in other people’s minds. I love the idea that the light comes up in somebody’s eyes when they ‘get’ something for the first time. I enjoy the process and the end result, as the end result is very important with these ideas. They changed my life, they had profound influence on the way I lived my life. I think these ideas can change the culture, the world in which we live, and I dedicated my life, at least the rest of my life, to fighting for those ideas.

Adrian Bye: Ayn Rand is critiqued as her writing being poor quality. I’m a big fan and I think her writing isn’t always that great. By the left she is certainly one of the most hated people in the US. You’re putting yourself in a pretty controversial spot to be fighting for that.

Yaron Brook: What could be more fun than that? Sorry to disagree with you about her writing. I think her writing is brilliant, her novels are brilliant. I can see that people disagree about these things, but the world disagrees with you. The world thinks these ideas are wrong, the world thinks Ayn Rand is wrong. The challenge is how do we convince people, how do we change people’s minds? How do we communicate these ideas in a way that shows the truth behind these ideas? It’s a fun, interesting challenge. It’s a frustrating challenge often because it’s hard. But that’s what makes it interesting. If that was easy I’d probably go to Wall Street trying to become a billionaire. That would be challenging and interesting. The fact that it’s challenging, that it’s interesting, that it’s fun and I go up against really smart people who disagree with me, that makes it interesting and fun. The fact that people don’t agree with me doesn’t make or break this proposition. It doesn’t change for me the truth of what I’m fighting for and why I’m fighting for it.

Adrian Bye: Right. I want to tell you about when I read Atlas Shrugged. I found the first hundred pages a bit tough to get through. Once I got through those, it was like ‘Oh my God, this stuff is making sense. I’m seeing all these things I never saw before’. I felt like my brain was being rewired. So many things started to become more clear.

Yaron Brook: I grew up in Israel, which at that time was quite socialist, quite oppressive if you were in business or if you had any aspirations from a business perspective. And I grew up a socialist. My story about Atlas Shrugged is a little different because I grew up as a socialist, a collectivist, I grew up as an altruist, everything that Ayn Rand is against. To a large extent I was taught that those are the truths. So when I read Atlas Shrugged it was like, this can’t be true. This is nonsense. She can’t be right. I fought it, I argued with her on every page. It took me months to read because I wasn’t convinced. I fought it and she had to literally walk me through the book and convince me of the truth of her ideas. And by the end I was a hundred percent convinced. But I had experienced both internally, inside myself, what it meant to believe in socialism, altruism and collectivism, and what a culture that believes in that is like. So I felt like I knew it in a sense in my soul.

Socialism is the least empathetic social system. I think capitalism has a lot more empathy than socialism, capitalists are generally far more benevolent and far more generous than people who are collectivists and socialists. I think the world has it backwards. When you visit a country like America, particularly in a period when it was free, you would have experienced a lot more empathy than you would in some of these socialist countries. Socialism really also destroys people’s souls. It turns them into envious, miserable, malevolent people. I remember seeing this more than anywhere else on the Kibbutz in Israel. This Kibbutz is this socialist Utopia. Everybody gets treated the same. No matter how much you earn in a sense you get the same apartment, you get the same food, you get the same television set, everything is the same. It’s completely egalitarian. And people resented one another. They back stabbed, they gossiped, they behaved meanly towards one another. It was just a sick, sick social environment to live in because it has this profound impact on the way people view the world, the way people view themselves. You can’t get self-esteem in a world like that so you’re desperately unhappy. That unhappiness projects onto the way you’re treating other people. Socialism is an incredibly destructive philosophy for living as a human being. Not just as a political philosophy, as an individual.

Self-esteem is the key to human happiness. You cannot be happy without self-esteem. Ayn Rand’s view is that the purpose of life is to be happy. The purpose of morality is to guide us towards happiness, towards a flourishing, fulfilling, happy, successful life. And in order to achieve that one has to have self-esteem. But to have self-esteem one must place value on one’s own happiness and one’s own life. The moral code of socialism and collectivism, the moral code of most religion and most secular philosophy today says no, you shouldn’t really think about your own happiness. It’s other people’s happiness, the well-being of other people that’s important. You cannot gain self-esteem if you believe that. If you really believe that your life is meaningless, that the purpose of your life is to serve others, to make them happy, to be a tool for their success, then how are you getting self-esteem, your own happiness? You can’t. At the end of the day, it’s all a question of whose life is it. Is it your life? Does your life belong to some group? Is the purpose of your life your own fulfillment, your own satisfaction, your own happiness? Or is it to serve some other bigger cause, the group, the state, the religion? Are you just the cog in some machine? That is the fundamental battle between individualism and collectivism, between socialism and capitalism. It’s a battle for the individual soul.

Adrian Bye: One of the reasons I moved to the US was growing up I felt America was a very free place you could really go and be great. It feels like this has changed somehow. The America that we have today doesn’t feel like the America that I looked at when I was twelve.

Yaron Brook: That is absolutely right. I came to America in 1987. I was 26 at the time and I think still in the late 80s through the 90s there was certainly a sense that there was opportunities, there was a certain sense of freedom. You were left alone for the most part even though government was huge, very oppressive, regulations and taxes everywhere. But there was a certain spirit to America and that has changed over the last ten, fifteen years. I think part of why we felt so good about America was a certain romantic vision of the country that even then it didn’t live up to. Atlas Shrugged was written in 1957, and Ayn Rand already saw America in decline starting back then. The American spirit, that spirit of freedom, of individualism, of everything is possible, is limited by the philosophy the culture holds. And when the philosophy is corrupted the spirit is corrupted as well. What we’re experiencing today is this corruption of spirit. Americans are less positive, less benevolent, less energized, there is less sense of this freedom. You feel less opportunities, less able to do what you want to do. And there is less of that spirit of individualism today than there was in the past. I think it’s declining and I think it’s very dangerous and bodes ill for where this country is heading towards.

Adrian Bye: I’m seriously thinking of leaving. And I want to be clear, talking to you, that it’s specifically because of this spirit I feel is crashing here.

Yaron Brook: Where do you feel it’s better?

Adrian Bye: If I were to leave, I would probably go back to the Caribbean, or potentially down to Brazil. I understand Latin culture well, I see those countries as growing. Brazil has this kind of socialist influence a little bit, but I think they’re really getting rid of that now and they are strongly going forward. I don’t feel the same way about here.

Yaron Brook: I think you’re right. There is definitely something going on in Latin America that’s interesting. That’s not just in Brazil, but especially in Latin America. They’ve experienced statism in a variety of different forms, fascism, socialism, statism, the involvement of the state in every aspect of their lives. There is a certain intellectual rebellion against that among any people in Latin America. In certain countries, Chile, Columbia, Brazil and some others there is some movement away from that towards greater freedom. I still don’t think that Brazil is anywhere near as free as the United States, but it’s moving in the right direction. There is also other countries that are moving in the other direction in Latin America, Argentina being probably the more dominant one. But even in Argentina there is a strong intellectual force that will rebel against that. The real challenge is this: at the end of the day the battle for freedom is going to be won or lost in America. I think even in Brazil or Latin America the vision they have of where they want to take their countries is America. America is still the symbol of what freedom means, of what economic freedom means, of what political freedom means. If America declines, if freedom really disappears in this country I’m not sure if the intellectuals in these other countries can sustain this spirit without America. This country is still the shiny city on the hill. It’s the idea of the Founding Fathers on America that’s inspiring the people around the world. And if they have a sense that they failed in America I’m not sure they have enough strength so sustain it in their own countries. That will be interesting in terms of the future whether I’m right or wrong. The intellectual battle for the future of western civilization, everything good about western civilization I think is happening right now, and is happening in this country.

Adrian Bye: Nathaniel Branden is someone I’m sure you’re quite familiar with. One of the things he talks about is encouraging repression. He has written quite a lot about this. I am curious as to your thoughts on the potential repression in Ayn Rand.

Yaron Brook: I think that there are a lot of people who take Ayn Rand seriously who are repressed. I don’t think that there is anything in the philosophy that suggests repression. I certainly have never been a repressed guy. I’m a very passionate person, very emotional. Emotions are important, how we experience life. I don’t think that there is anything in the philosophy that’s anti-emotion as that, I don’t think it’s a repressed philosophy. I think some people who have adopted the philosophy are repressed and have given it a bad name. And, more than anybody else, that’s through Nathaniel Branden who I think was a repressed person, who instigated a very repressive tone to the philosophy and to the movements. I don’t think the philosophy demands it or requires it or encourages it. I just never understood what he was talking about when he talked about the damage that the books cause people. I never experienced that damage.

Adrian Bye: Do you want to tell me about your book?

Yaron Brook: It’s called Free Market Revolution. It sets it up like this: Capitalism works. We know this. We can go to Cuba and we can look at Hong Kong and the United States. We can see the difference in the standard of living, the quality of life. There is no question, no doubt that capitalism works. So the real question is: given that, why isn’t everybody a capitalist? And our answer is, capitalism is perceived by most people as immoral, as wrong, as ethically evil. As a consequence that taints the view of economics, the view they look at Cuba and the United States. They are shaped by the moral code of altruism, of placing the well-being of other people above your own interests. That is the morality that we’re all taught. That is a morality that is consistent with socialism, fascism and all variants of statism. It’s not consistent with capitalism. Capitalism is about self-interest, about individuals going out there and trying to make their lives better. But if we are taught from a very young age that self-interest is evil and not moral, then we’re never going to respect capitalism. We kind of review Rand’s view of self-interest, put it into modern context of the world as it is today. We talk about the financial crisis, about health care, regulations and taxes as they are today and why all of that is driven by a false view of ethics. What we really need to fight for is rational self-interest, individualism, the virtue of self-interest, the virtue of living your life for yourself in a rational way knowing that it is moral. And that goes back to what we said earlier about self-esteem. Doing that is what generates self-esteem, that’s what generates happiness, that’s what generates success. Capitalism and happiness are tied together by this moral code that Rand has presented us with. And I think the culture needs to take it seriously if it’s going to save itself.

Adrian Bye: Yaron, thank you very much, that was a really good interview.

Yaron Brooks: My pleasure. Any time.

Personal Info

Sports Teams:NY Mets, NY Knicks, NY Giants, NY Islanders

Favourite Books:

• If On A Winter’s Night a Traveler by Italo Calvino
• Invisible Cities by Italo Calvino

Twitter: http://twitter.com/CharlieShrem

Personal Blog: http://blog.bitinstant.com

Website: http://bitinstant.com

Relevant Link: http://www.linkedin.com/in/charlieshrem

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today I’m here with Charlie Shrem who is the CEO and founder of BitInstant, which is a Bitcoin company. Charlie, thanks, and welcome to my little program.

Charlie Shrem: Thanks for having me. I appreciate it.

Adrian Bye: Can you tell us a little bit about who you are and where you’re from?

Charlie Shrem: Sure, my name is Charlie. I’m born and raised and first incorporated in Brooklyn, New York. I started getting involved in the Bitcoin space in early 2011 when it was still fairly new. The first ever Bitcoin post by Satoshi was on November 1, 2008, but it didn’t really get any attention until somewhere around late 2009. Sometime around 2010 was when the first Bitcoin exchanges in companies started popping up, and I was one of the first startups in the Bitcoin space. Our company BitInstant allows people to buy in some Bitcoin local locations all over the world.

I’m 23, grew up in New York, went to high school here in Brooklyn, and went to Brooklyn College. In my freshman year I started a startup. My cousin came to me with a cool idea, dailycheckout.com was the name of the site, where we’d sell one product every day. This was before Groupon. We ran for about three years in college under Platinum Capital Growth. I have a degree in economics, but it’s Keynesian economics. So it’s the complete opposite of what I’m believing now, Austrian economics and Bitcoin. I guess I needed to learn the other side before I can see the light. And then, early in the fourth year of college, we got a great offer to sell Daily Checkout.

Adrian Bye: Was it a good sale?

Charlie Shrem: Yes, really good.

Adrian Bye: So you made some good money and had some time off and figure out what’s next?

Charlie Shrem: It wasn’t like crazy millions or anything, but for a twenty year old kid the money that I came into felt like I was a super millionaire. At the same time, the experience and the knowledge was just amazing. It was the best three years of my life. And then one day I was browsing on the Bitcointalk forums.

Adrian Bye: I read this. You started reading about Bitcoin and became obsessed. Did you buy Bitcoin when you started doing that?

Charlie Shrem: Yes, I became obsessed, and I started to buy some Bitcoin. It took about two weeks to buy Bitcoin at MtGox, the wire got frozen, Tradehill’s bank account got closed. It was a big hassle.

Adrian Bye: It still is. I’m trying to get into Bitcoin now. It’s probably three weeks and I’m still waiting.

Charlie Shrem: It’s ridiculous. I put all of the money I have and had into BitInstant because when I was browsing online I came up this post. I said to myself, if this thing is going to succeed there needs to be an easier way to get money in and out of this system, a lot easier. So I was browsing on the Bitcointalk forums and saw this post by this guy, Gareth Nelson, who said I have this great idea. He was calling it Fast MtGox Pay. He came up with this idea for BitInstant. I emailed him and said, here’s a thousand dollars, that’s all the money I have, let’s do this project. That is how we started BitInstant two years ago. Bitcoin was such a joke back then, it still is. If you look at what Ghandi said: first they ignore you, then they laugh at you, and then they fight you when you win. I had thought that we were at the laughing stage two years ago, but I realize that actually we were still in the ignoring stage. Now we’re in the laughing stage. We have the world’s spotlight on us. The news, the press, the media love to cover it because it’s fun, it’s interesting. But at the end of the day they really don’t understand the utility and how it works and what change it will bring to the world. Bitcoin is just raw infrastructure, and it takes whoever can really harness that and develop it into a mainstream product, which is what I’m trying to do.

Adrian Bye: Why don’t you tell us about the idea of BitInstant? You talked about it used to take two weeks to get into MtGox, which is the central Bitcoin exchange. I’ve opened up my account there and it’s still not validated probably three weeks later. BitInstant is doing something totally different. Why don’t you tell us how that works?

Charlie Shrem: There are two types of Bitcoin customers, the under 10,000 dollar customer and the over 10,000 dollar customer. For anyone who wants to buy over 10,000 dollars worth of Bitcoins you really need high-quality know-your-customer and AML policies, which is why we’re going through this crazy verification. But 80% of people buying Bitcoin don’t care to buy 1) on an exchange and 2) don’t need to go through all that rigorous KYC, the postal and all that. So I said, let’s develop a way where we are not treating every customer like a criminal. We developed a KYC program way before any Bitcoin company was doing that. What you see right now is BitInstant Version 1. We’ve never changed our site in two years. I’d say 60% of our customers are using our API and aren’t even coming to our website. Or they are using our services that are integrated into one of the App. We’ve really conquered the market share in buying low amounts of Bitcoin. Using BitInstant you can go into any Walmart, 7Eleven, CVS, Duane-Reed, Walgreens, Albertsons and buy Bitcoins. We’ve made partnerships. We are essentially using their register. You come to BitInstant.com, create an account with us. Say I want to buy four hundred dollars worth of Bitcoin. It would pull up a map, you would type in your zip code and it would find your nearest location. You print out a deposit slip, bring it to the teller, hand the cash and the slip to the teller, and that’s it.

Adrian Bye: How much Bitcoin can someone buy through BitInstant?

Charlie Shrem: Right now we have a flat daily limit of $2000 per day, of $500 per transfer. But we do a have velocity check, so if you’re doing a limit for three days straight, then things will get frozen.

Adrian Bye: Personally, I need something simple to pay people with, and I would like starting using Bitcoin and I haven’t been able to. I need to be able to pull maybe a thousand bucks a month out in Bitcoins.

Charlie Shrem: That’s the thing. There are so many good uses of Bitcoin and great utility, but the infrastructure just isn’t there yet.

Adrian Bye: You made an interesting comment which I didn’t understand. You said: Mining is not actually mining, it’s auditing. Can you talk a little bit about that?

Charlie Shrem: Visa has their central transaction server and a data center. They pay billions of dollars a year to make it work because you need that trust. PayPal is the same thing, that’s how databases work. But with Bitcoin Satoshi said we’re going to take this database that everyone can see, everyone can read it, and instead of keeping it on a server somewhere and having all the transactions be written on that database’s central server, let’s give everyone a copy of the database. Everyone’s going to download a copy of the database. But then you need a way for all new transactions to be written into this database. The problem is that because it’s on everyone’s computer it requires a lot of computing resources to actually connect to every single one and to write to it. It’s like file sharing. it takes a lot of resources. Also don’t forget you need a way to check every single database to make sure that someone’s not taking his Bitcoins and double-spending them. Satoshi said we need to solve two problems: we need massive amounts of computing power to be able to write to all these databases in real time as transactions are happening. Not only that, we need a way to release Bitcoins, in an automated way, in a predictable scale, but not rewarding anyone for doing nothing. There needs to be a real reason for these people to get these Bitcoins. He solved that with the system of mining. Essentially, anyone can mine. Your laptop won’t really do much because the amount of Bitcoins that you’ll be getting is the computing power of your computer relative to the whole network. So if your computer is 1% of the whole network, you will get 1% of the new Bitcoins that come into it. Every ten or fifteen minutes the block chain takes all the transactions that happen in those fifteen minutes, wraps it up into a block and puts it into the mining pools for auditing. And then all the miners try to solve this really, really hard math problem. That takes a long time, fifteen, twenty minutes. While they are doing that they’re taking all these transactions and broadcasting it to the whole network. Once it’s written in and confirmed, the block becomes confirmed. And then, whoever “found” the block, whichever miner actually gets the Bitcoins.

Adrian Bye: One of the ideas that is being proposed is a currency. Let’s say Bitcoin breaks and we could have a currency without mining. Even with Bitcoin as it is now, mining will become redundant because we will have mined the whole thing. How does that all work? How does all that fit together?

Charlie Shrem: I think there are two questions. I want to answer the second one first. Mining will not become redundant. What happens is once there is no incentive for new coins to be mined, miners need to make money in another way because transactions still need to be audited. And it’s very important that they do. These guys are like the soldiers for Bitcoin. All Bitcoin transactions are free but you have the opportunity to put a transaction fee on to it. By doing so miners are incentivized to take your transaction and audit it first. If you attach even a few cents your transaction could be put into the next block. If you don’t attach a transaction fee, it could take a day or two for it to have one confirmation. If I’m selling a car or a house I want it to be confirmed as fast as possible. So I’m going to add ten or fifteen bucks and then a miner will want to put it in. The hope is that as the reward for Bitcoin gets smaller and smaller every four years, it went from 50 Bitcoins to 25 Bitcoins and then to 12 and a half, that by the time it reaches the zero point, the size of the Bitcoin economy itself will be big enough where people want to put transaction fees. 25 Bitcoins in a block is nothing. And that will overtake it. Satoshi thought of all of these things. He knew that mining will become redundant, and you would still need to incentivize miners. We’re seeing it already. People are attaching transaction fees. If you’re trying to withdraw Bitcoins from MtGox and you don’t click ‘add transaction fee’, there is a warning message ‘Are you sure you want to send this transaction without adding a fee to it? It may take a few days for it to get confirmed’.

And then the first thing you asked: I think Bitcoin is three things. Bitcoin is a currency and it’s a payment system. And more importantly, it’s a protocol. It’s a system.

Adrian Bye: It’s a platform.

Charlie Shrem: Exactly, a platform. VoIP and HTTP are exactly like Bitcoin. But VoIP is a protocol that billions of people rely on every day that’s never been hacked. For the same reason Bitcoin’s never been hacked. It’s Open Source, it’s worldwide, anyone can be involved in it. At the same time, the idea of a virtual payment system and a currency that’s not controlled, issued or regulated by any state, government or corporation is what really makes Bitcoin worth billions of dollars. Bitcoin as we see it now may in fact fail. Bitcoin is flawed. There is a problem with it and it could fail. But then you’ll have Bitcoin 2.0, you have Namecoin, or Lightcoin, or Ripple. I love the ripple guys and I love the concept even though I don’t fully understand it. I’ve seen Bitcoin like the largest socio-economic experiment the world has ever seen. You’re taking all these people around the world who before Bitcoin had no interest in each other, no common goal, nothing, and now we’re taking all of these millions of people today that are all involved in this experiment together.

Adrian Bye: Ripple to me is very interesting. The web is essentially a peer-to-peer system. On top of that is this concept of a distributed trust network. This is where Google uses backlinks where sites can link to other sites. That was a profound innovation when Google came along. Facebook is the same. It’s a peer-to-peer and then it’s a distributed trust network on top of that. Ripple is the same concept in the Bitcoin world. Bitcoin is the peer-to-peer platform, and then Ripple is a distributed trust network built on top of that. The concept of Ripple is that we have to effectively rate all our friends and say how much we are willing to extend credit to them. That sounds horribly annoying. I was initially very negative on it, but then seeing that it works on the same concept that applied for Google and Facebook, this peer-to-peer with distributed trust network on top says to me that maybe there is something in Ripple. I’m curious as to your thoughts.

Charlie Shrem: I agree totally. I really felt the same way for a long time. I was not a fan of Ripple whatsoever. Fast forward now, Chris Larsson and his team are unbelievable people. The whole concept is just truly genius. How he applied it to money I think is just novel and should work. Ripple gives the ability for lending in Bitcoin. Banks are allowed to lend a certain amount of money based on how much they have, and that is how money is put into circulation. With Bitcoin it’s very different. Money is put into circulation in a different way. There is not much of an incentive to lend because you have to lend with money that you have, not with made up money like banks are allowed to do. Ripple gives the ability to lend people money without having to trust someone who walks in your door just randomly because Bitcoin is irreversible. If you lend somebody money there is just so much you can do to get that back. With Ripple there is this trust network setup. I don’t really like it, but I think it’s too early to tell. It needs a lot more adoption and everything to see. But the main point is that Ripple is not a competitor to Bitcoin.

Adrian Bye: It’s an additional layer.

Charlie Shrem: Exactly, it’s extremely complimentary.

Adrian Bye: Distributed trust network is an important concept on the internet and so it wouldn’t surprise me if what they end up doing works.

Charlie Shrem: Yes I think it could be a cool infrastructure for banks to use.

Adrian Bye: Great. Charlie, thank you very much for your time.

Charlie Shrem: Thank you.

Personal Info

Sports Teams:Liverpool from the UK

Favourite Books:

• The Blank Slate by Steven Pinker
• The Selfish Gene by Richard Dawkins
• The Moral Animal by Robert Wright

Most Influenced By:Larry David

Personal Blog: http://vimeo.com/user5971760/videos

Website: http://www.funkenhauser.no

Relevant Link: http://newyork.io/video/brainwash.zip

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

Adrian Bye: Today we’re here with Harald Eia, who is one of the best known comedians in Norway. Harald made a very interesting TV show called Brainwash and that’s what we’re here to talk about today. So, Harald, thanks for joining us.

Harald Eia: Thank you so much, it’s an honor.

Adrian Bye: Do you want to tell us a little bit about who you are and what you’ve been doing?

Harald Eia: I’m a trained sociologist. After working a couple of years in research I went into television, in comedy, but I kept on reading science. My focus shifted from traditional sociology to biology, evolutionary psychology and behavioral genetics, Steven Pinker and David Buss, all that new science of the human mind and human nature. For me that was so new and interesting and went against everything I was taught at university. After doing some research I felt that the whole academic life and all culture was uninformed about these perspectives. So I decided to make a popular science show about that.

Adrian Bye: I think I read a quote from you somewhere where you said you felt cheated.
Can you maybe talk a little more about that?

Harald Eia: Yes, sure. Basically, when you study social science, especially sociology, there is some implicit premise of human beings that we are born with a blank slate, that basically all of our feelings and the way we think and all our culture is just a product of socialization and influence from our parents, media, society. And that the other part of the story, the nature part, is being ignored basically. For instance, why is it that children who have parents who are academics also become academics? Why this is called the reproduction of the class society? Why is this reproduced from one generation to another? The only explanation I was given at university was that it has something to do with how you’re socialized at home, how you’re influenced by the other books in the shelves your parents tell you to read. If somebody asked ‘what about genetics?’, maybe you would be laughed at, or ignored, or the teachers would say something like ‘I think we gave that way of thinking up after the Second World War’. But when I started reading these things, behavioral genetics, when you study twins and children who are adopted, it turned out that genetics has a whole lot to say. I found that very interesting, and nobody told me this at university, even though I studied class structure and inequality. Because I wasn’t told about these perspectives I felt like it was an intellectual scandal.

Adrian Bye: Right. We’re taught about Darwinism, Charles Darwin, and we’re taught that we’ve descended from the sea and we came from fishes. We’re not really taught what’s going on. I saw an interview with Richard Dawkins talking about how he looked at it the first time and that’s how he understood it. Then ten or so years later he looked at it again and really started to understand it. It wasn’t until the third time that he really looked at Darwinism that he really got it. And I found that it was the same process for me, too. It’s shocking that we’re not taught all of this.

Harald Eia: Yes. Sometimes you read in the newspaper that scientists have found the gene for watching television or men have a bigger penis because of. The explanations are so simple so you learn to ignore them. Most intellectuals are smart people and tend to ignore those perspectives because they find it too stupid, too simple. They never make the effort to really go into those problems or perspectives. I realized for instance when it comes to Darwinism, most liberal educated people believe in Darwin. But the belief stops at the neck or that our psychological life or inner mental life has nothing to do with evolution. But of course it does, evolution has formed the way we think, the way the neurons are wired.

Adrian Bye: Here in the US they brought Pygmies over from Africa. Pygmies are a race that are known for having an IQ on average of 54. They ended up being kept in a zoo. Now, that is the extreme end, and then we have Hitler that’s come along and created the Holocaust. There is obviously some really harsh elements to all of this. I would actually be in favor of brainwash and saying hey, let’s not talk about this stuff because some of it is too nasty. Where do you stand on these sorts of things, and how do you think it should be handled?

Harald Eia: I think that’s difficult. In Norway we don’t speak about race. We don’t use that word because it’s so closely associated with the Nazi regime. So we don’t speak about that, we don’t speak about skin color, we don’t talk about the whole race thing. As the starting point it was taboo already for me. Then I talked to some behavioral genetics that study adopted children, twins and all that, and I just asked them can we talk about race? They said no, we can’t talk about that. Why not? Turn off the camera. Why can’t we talk about it? Is it because you have some results you don’t want to talk about? Yes. We realized oh, this is a hot button, this is really dangerous. We realized that nobody knows whether for instance there’s a genetic component to the intelligence differences between people because no one really want to study it. And those few who say let’s just face reality, there are some genetic differences when it comes to a rich intelligence level between different people on this planet, they are far right. They are extremists. They want to talk about it. So the whole field of thinking about some inherited differences between people, when it comes to mental faculties, is so political already.

And then, why should we do it? Why should we focus on it? Could we learn something from it? Would it benefit some people? I’m not sure. Charles Murray said we have to face these realities because if we want to help people it’s better to know why some do better in school, why some score a lower scores in IQ tests. But at the same time people are so stigmatized. If Charles Murray said that on average African-Americans have a lower IQ score because of the genetics, and if you were a smart African-American man, it would hurt you. It wouldn’t help you in anything. In an ideal world people would treat everybody as individuals, but in the real world we don’t do that.

Adrian Bye: You made this series which you’ve put online. I started watching it, and I was, oh my god, this guy figured it out how to take really sensitive material about both gender and about race and communicate it to the world. You did it in one of the most feminist countries in the world. Do you want to talk about what you did and the response?

Harald Eia: My original idea was to present some new and exciting findings and perspectives. For instance, why is it that women in this gender egalitarian society still prefer not to work with engineering and mechanics and prefer to work as nurses? There are two suspects there: that could be nature, it could be nurture, it could be both. One said it can only be nurture, that’s the traditional sociology perspective, and the other said it can probably be some nurture, but it’s a lot of nature as well. I wanted to go out and find out if it was true. Can the researchers be wrong? And then we went back to them, to the researchers, and presented them with Steven Pinker, what he said. And, as most people do, scientists as well, they’re just no, I won’t change my mind at all.

But when we broadcast it, it exploded. The debate in national newspapers and in television programs went on for at least half a year because we attacked some of the most rhetorically strong people in our society. They were furious. It had such a tremendous effect. It really took us by surprise that people would get so mad. On average, there was a feeling that many intellectuals were not seeking the truth. Some scientist shouldn’t care about having one pet theory because it suits one left-wing ideology better. I think it was a relief for a lot of people. At last, somebody there is going against that political correctness that’s holding the debate down and stigmatizing some perspective that’s right-wing. People felt it was kind of liberating. I don’t know how much it changed but some of the left-wing intellectuals now aren’t as arrogant and ignorant as they used to be. And that’s a good thing.

Adrian Bye: Having researched all of this and gender differences, what do you think about concepts like free will?

Harald Eia: It’s meaningful to talk about free will. I’d say it’s a huge and very complicated question. We are probably not free to choose our preferences. They are kind of given. But we can choose what to do still. I mean, we can go against some of our natural feelings, we have the pill so we can have sex without having children, there is a lot of room for maneuvering in this field of emotions and mechanism we are born with. We can choose to not be slaves of our emotions and preferences. If we know how our mind works, and why it works at its best we can organize our life in a way that makes us freer. It’s a bit of a philosophical question, but I feel the more you know about yourself, the freer you can get.

Adrian Bye: Have you ever heard of an author named Ayn Rand? She is one of my favorite authors. In Atlas Shrugged, which is her key book, there is the State Science Institute which is supposed to verify how science works in the country and its connection with business. There is a lot of problems with corruption in the State Science Institute and how their messages is being distorted. I think you may want to read Atlas Shrugged because the parallels between that and what you’ve found is identical.

Harald Eia: Yes, I should read it. There is always a problem, at least in Scandinavia, to do gender research. There tend to be the same kind of people involved, they’re all on the left. It’s never healthy to have a group of people seeking truth that are all the same. It’s good to have both genders, to have people from different political stands. I wouldn’t say that the social science in Norway was corrupted, but they only looked at the world from one perspective. They did that because they were all thinking the same way. They had the same background, the same values. We have to make sure that we quote not only women into social science, but conservatives and people who believe in the free market. So it’s healthy to have these different opinions. It’s easier to seek the truth and to be intellectual uncorrupt if there’s a polyphony, different perspectives.

Adrian Bye: What you are saying goes to the heart of nature versus nurture. We don’t know where the line is between nature and nurture. It’s somewhere there. And you need to get both perspectives to be able to find where the right position is. The impression I got from your TV series the people, maybe corrupt isn’t the right word, but they weren’t seeking the truth as much as they should.

Harald Eia: They had decided already what was the truth and they didn’t take the other perspectives seriously. Their level of knowledge when it came to biology was like a 8th grade. If you want to help women, if you want to make a society where the genders are equal, have equal rights, it’s good to know whether there is a natural difference in women and men psychology. I think it’s smart to have a perspective to make a happier life for women instead of pretending that the genders are equal and then pressing women and men to do things they don’t want to.

Adrian Bye: The biggest people that responded after your TV show, was that the angry white men in Norway?

Harald Eia: Yes, they were angry at these gender researchers, very angry. There is a lot of hate against political correctness. But I hope shows like Brainwash will give people and the angry white men a feeling that it’s okay to discuss these things instead of the political correctness that tends to hold this debate down. For instance, ten years ago in Norway it was forbidden to discuss any problems when it comes to immigration. And in Sweden it’s still like that. What happens is you get a right-wing party that’s really popular, really far right-wing, but you lose control over the debate because the debate is not free. It’s important always to try to have these free discussions inside society instead of saying we can’t discuss this. That makes people really angry.

Adrian Bye: How was the response of women to the show?

Harald Eia: Women are hurt from hearing, hey, you are a woman, you can’t do this. They are tired of hearing that there are some differences between men and women from birth, but on the other side the state and the education system have always been pushing women, hey go into science, go into engineering, you should do more of this, less of that. Women’s interest in fashion, humans, feelings, all that, is not as valuable as men’s interest in science, technology, money status. So many women felt it was liberating. For many women I talked to it was like a burden was off their shoulders. I think they should follow whatever their preferences are. Most women were happy. Of course some women had based all their world view on this kind of research, they were kind of provoked. Our message was not you’re wrong, our message was we have to think in both nature and nurture. It wasn’t very extremist.

Adrian Bye: We don’t know where the line is between nature and nurture in all these things, and we probably won’t for another hundred or more years. We can’t know, and it probably depends on the person, too.

Harald Eia: Absolutely. It will strangely enough depend in what society we live in. Two non-identical twins they ended up having basically the same life a hundred years ago. Today, two non-identical twins have very different lives because what they’re born with matters more and the social background matters less. And the same thing for women. If you were a smart woman two hundred years ago, what could you do? Nothing. But today you can realize your potential. So nature has more to say now than it used to in a way.

Adrian Bye: There is no doubt obviously that that’s all improved. It’s just where is the line in the end and making sure that people are living instead of just distorted lives happy lives. I think that would be your goal with all of that, would it not?

Harald Eia: Absolutely, yes.

Adrian Bye: We are almost out of time. Is there anything that you want to tell us about
which we haven’t covered?

Harald Eia: I would recommend Jonathan Haidt, who has written a book, The Righteous Mind, which I really think will take the whole Brainwash discussion nature versus nurture one step further. He’s studying how all these tendencies we’re born in can be weakened or how culture can make it stronger. I found it’s very interesting. So I hope I can do something maybe based on his work. It’s exciting times we’re living in.

Personal Info

Sports Teams:Coritiba Soccer Team

Favourite Books:

• How To Win Friends And Influence People by Dale Carnegie

Most Influenced By:Bill Gates

Website: http://peixeurbano.com.br

Relevant Link: http://facebook.com/PeixeUrbano

Interview Highlights

This is a condensed, lightly edited transcript of an audio interview. The full audio is available and highly recommended. The interviewee may post clarifications in the comments.

?Adrian Bye: Today I’m here with Emerson from Peixe Urbano. Emerson is actually in Rio de Janeiro in Brazil. His company is one of the most successful companies in all of South America, started with daily deals, but has expanded in a lot of areas. Emerson is going to tell us all about it. So, thank you for joining us.

Emerson Andrade:Thank you, very nice talking to you and your audience.

Adrian Bye: Do you want to talk a little bit about your background, where you grew up, where you went to school and what you’ve been doing?

Emerson Andrade: Sure. I was born in Brazil, in the south of Brazil, Curitiba. In 2005 I decided to get my MBA at Stanford in the US, so I moved to the US. When I graduated I took a job at Microsoft in Seattle where I worked for three years before coming back to Brazil, more specifically to Rio. I came back to start Peixe Urbano.

Adrian Bye: Were you there at the very beginning when the site started?

Emerson Andrade: Yes. We were three founders, one of them was my classmate at Stanford and was the first who originally had the idea. He had a friend who was an engineer, Alex, our third co-founder. He called Alex and me and said he was coming back to Brazil to start a company. The focus would be on Local Commerce, but we started with daily deals. That was January 2010, and in March we all came together in Rio and launched the company.

Adrian Bye: I’m curious about the starting. One of your friends had the idea and said come back to Rio and help us. That was basically the catalyst?

Emerson Andrade: Yes, Julio had wanted to come back to Brazil for a long time. He went to college in the US, and after the MBA at Stanford he stayed in the Bay Area working for a startup. Whereas myself, I went to college in Brazil, had worked in Brazil before and when I moved to the US I actually wanted to stay in the US for a while after graduation. I wasn’t really planning on coming back to Brazil. So when he called me it was part of his plan to come to Brazil because he had never worked here and saw a lot of opportunities in Brazil. Brazil was and is growing fast, so he said it’s my time to go to Brazil. He had been studying several ideas for about a year. He called Alex and me and said, look, I’m going back to Brazil and I want to launch a business there. I want you both to come. Our professional experiences were very different. I had a very extensive commercial experience, sales experience, whereas he had worked in marketing a lot, and Alex is an engineer. He said for the daily deal business, that’s exactly what we need. We need someone good at engineering, someone who is going to be able to bring a lot of users to the site (and that was initially his job), and then my job would be to go after the deals, so more like the sales side of it. That was his idea, that’s what he proposed. I initially said, ok, Julio, I have no plans of leaving Microsoft at this point and going back to Brazil, but let’s talk. And in March I spent a month on vacation in Brazil – the month we started to work together and launched the website.

Adrian Bye: I’m interested to hear how you actually started the site. You went back and spent a month in Rio and then the three of you just got some hosting, put the site up?

Emerson Andrade: In fact, Julio and Alex put the website up around January, but on the website there was only a landing page. It only said ‘coming soon: offers in restaurants, hotels, salons, with 50-90% off’. And there was a box where people could leave their email addresses. For about two months, they ran a few Google and Facebook ads, and by March they had been able to register about five thousand users. So when I came to Brazil to spend my vacation we started working on getting the actual offers, visiting merchants, some in Rio, a few in Sao Paulo, and also in Curitiba. In fact, I didn’t come to Rio that month, I had worked with them remotely, that’s how we started.

We had this page where we were able to get 5000 users, and then we got a few merchants who wanted to try what we were about to do. No one was doing it in Brazil. There was no daily deal website in Brazil or anywhere in Latin America, the model was unknown here. And then at the end of March, we launched our first deal in Rio. We had sixty coupons available for that. The next day we were all curious to know if anyone was going to buy anything, if they’d believe in the offer, believe in the model. There were actually four coupons sold already that first morning. And then, after three days, the offer sold all sixty coupons. At this point I had to decide whether I would go back to the US after my vacation. I said I’m going to regret having lost the opportunity to build something big here in Brazil. I’m going to regret it more than anything else, because even if this doesn’t work, I’m still going to learn a lot and have some fun. I cannot be left out of it. So that’s when I went back to the US, quit Microsoft and came back definitely.
 
Adrian Bye: Can you tell us a little bit more how the first year of the company went? You had your first round where you sold the sixty deals in a couple of days. You mentioned that it was just you three working together for the first year or so. How did that work?

Emerson Andrade: Actually, the first month there were the three of us, plus maybe three or four people. We started off with about 5,000 users and the goal was to close the year of 2010, so that was in nine months, with 300,000 users.

Adrian Bye: That’s a pretty big goal.

Emerson Andrade: Yes, that was a big goal, going from 5,000 to 300,000. We started with the offer in Rio, and we wanted to expand more or less with a basic one city per month approach. The goal was to be in eight to ten cities by the end of 2010. What actually happened was we accelerated our growth tremendously. In August, we decided to increase the rate of opening new cities with offers. We ended 2010 with 5 million users instead of the 300,000, and we were already present in 34 cities by the end of that year. If you think that for each city you open you need to hire salespeople, at least two or three, or in a city like Rio of course many more, then you need to grow internally also. You need to hire copywriters, designers, people to talk to the merchants, to schedule the offers. As you increase the number of cities, you need to have all of the operational side of the business in the office grow at the same pace. In nine months we hired 270 people. We ended the year of 2010 with 270 people in the company.

Adrian Bye: Oh, wow. At what point did you get funding?

Emerson Andrade: I think it was around July. I don’t remember the month exactly, but it was few months after being in. Of course we were talking to investors before that, but actually we were not in need of money in the initial moment. But then by the end of the year we had our first round. We really had to accelerate. In the beginning, we had two VCs, one in Brazil, Monashees, and one in the US, Benchmark Capital. Monashees is in Brazil, and has a lot of connections here in Brazil, and then we had Benchmark with Matt Cohler helping us. He was one of the first employees at Facebook and LinkedIn, with a lot of experience and knowledge. So it was not only important because of the money, but also because of all of the connections and the extensive experience they had with other online businesses, including in the US.

Adrian Bye: Like what sort of things were they able to help you with that were non-monetary? Like outside connections, what kind of things were they able to do?

Emerson Andrade: Actually, connections were very important. For example, we wanted to enter Sao Paulo, and Monashees is in Sao Paulo. These guys know a lot of merchant owners, like owners of restaurants, hotels, so for us it was important to have that connection to be able to quickly get good offers on the website. We knew that what really made the business grow were good offers. So they helped us with that. One of the Monashees investors was friends with an important figure here in Brazil, Luciano Huck. He’s a TV presenter, a celebrity who’s involved with businesses in Brazil as well. So this guy ended up being an investor for us, someone who helped us gain credibility in Brazil. Everybody knows him and he became part of our TV marketing campaign. That helped us a lot in terms of image and strengthening our brand.

As for Benchmark, it was a lot about brainstorming and deciding whether to go faster or not, really going crazy about opening cities or maybe focusing more on quality and continuing to grow in a pace where we would be able to really control the process. The decision was to run really fast. We were the pioneers, we needed to continue be the leaders in the country. We could not let other websites open in cities where we were not present, we needed to be pioneers in those cities as well. That was part of the conversation with them. This is the type of situation we would discuss with our investors.

Adrian Bye: You’ve obviously been inspired by Groupon, but then you’ve gone in quite a different direction. You have a Brazilian version of OpenTable incorporated, and you’re doing some other stuff as well.

Emerson Andrade: Since the beginning the idea was that we were going to build something that dealt with local commerce, ways for people that are on the web to find things that the city offers offline. Daily deals was the model we decided to begin with because nobody was doing it. It was growing fast and we felt it was a good way to start. People come to our website to learn about new things in their city, and in the case of daily deals, we give them an incentive to get to know a new restaurant or a new salon, because we give the discount. But there are other ways to help people to get to know their cities and to explore more new restaurants or new services in their hometown. That was the idea in the beginning and we thought about executing that for about a year or so before we started doing a few acquisitions to launch new businesses. One of them you just mentioned is reservations, like OpenTable. The other one is online ordering for delivery. Like in the US you have Seamless. In the US, for each one of those segments, you have one strong company. If you think about reservations, you think OpenTable. If you think about deals, you think Groupon. If you think about a guide, you probably think Yelp. So it’s pretty hard for any of those companies to enter into the other segments because there is already a strong player there. In our case, there is no big player in reservations, there is no big player in online ordering, and there is no big player in guides, so we felt that we could build something that could aggregate all of these services for our users.

Adrian Bye: Which is really an incredible model. It would seem you’re building a big tree and that you are able to build a good foundation under the tree as well.

Emerson Andrade: Yes, we think in two ways. For the user we would like to help them to explore the city. So how can you help them explore the city? Well, if you have a good guide, like a Yelp type where people can see pictures of where their friends are going, read reviews and post reviews, that’s one way. The other way is once they decide where they want to go, they can make a reservation. Or maybe if the place offers delivery, they can order immediately online. Or maybe the place has a promotion that day and they can buy the offer on our website. So it works as a platform where you give several options to the user so they can explore the city. That’s looking at it from the user side.

Then we have the merchant side. When we think about the merchant, we want to offer them several ways to help them grow and manage their businesses. With daily deals they can attract maybe a hundred or a thousand new customers that they can then serve well and gain their loyalty. In the case of delivery, we have several merchants who say that before they had many more people taking phone calls, processing orders and getting credit card numbers over the phone, and now orders arrive through the internet, error-free and already paid for. So we help them manage and expedite their operations in addition to getting new customers.

We want to be the destination for people when they are going to go out, try new things, reserve, order, experiment, read reviews or post pictures of dishes that they like in restaurants. That’s the idea. We have about 20 million users, and we have about 25 to 30 thousand merchants with whom we’ve had a business relationship in the last two, three years.

I think for Brazil it’s an interesting story. There are not so many startups that have grown this fast and have been able to build such a strong brand in just a few years. I always like to talk about that because we’ve seen that other people here in Brazil have been inspired by that and we’re seeing many new companies being launched. Sometimes they mention to us that what we did was something that has motivated them to also try to start a business. It’s great that we can help and show people that it’s possible. It’s risky, you’re going to work hard, make mistakes, but still it’s possible to build a large business. So I’m proud of all we’ve been able to achieve so far with Peixe Urbano.

Adrian Bye: Yes, three years ago you were just three guys talking about, and now you’ve got hundreds of employees, so that’s pretty incredible. Well, Emerson, thank you very much for the interview.

Emerson Andrade: Thank you, Adrian. Very nice to talk to you.