Transcript
Roblox Origin Story
**** · You just said something interesting before we started recording. I asked you how old you were when you started Roblox.
**** · That's **** · You told me the age and then you said, "Oh, that's an interesting story and metaphor there." What did you mean by that?
**** · So, first off, super interesting story cuz arguably one could say I started Roblox when I was 2 years old cuz a lot of this [ __ ] really fascinates me. But there's an interesting story because before Roblox I had started a company called knowledge revolution physics enter educational software simulator how to learn physics very early getting into motion and simulation and all of that. We were in this very unique position with knowledge revolution way back in the early days of the Mac in that we had all of these kids instead of using it to do their physics experiments they were starting to build stuff. It was 2D at that time. it was just in the pre- internet time. And so we could see them all trying to build and share their stuff.
**** · And so we see the oh my gosh, there's going to be a whole new market here.
**** · Immersive 3D multi-player playing, working, learning, listening to music, all of that stuff. What happened along the way to the founding of Roblox is in that period after knowledge revolution I took a two-year sbatical in a way I went a little astray I started going more lo almost more logical okay I want to start a company and I wasn't thinking about just all of the stuff we learned at knowledge revolution so at about a year in I had a bit of a it's almost a vision where I was saying, whoa, you can't be logical on this. You have to be intuitive and go back to some of the roots of knowledge revolution, which was all about fun and about play and about building something very innovative. So instead of this logical track, me and some several people from Knowledge Revolution said, "We're going to do this very unorthodox thing and build this wacky new product, immersive human coexperience multiplayer cloud-based creator-led UGC.
Sabbatical and Intuition
**** · Very illogical, very risky." It was logical and risky because at the time you were doing this. This is 2002 very no one got it back then and no one quite thought of it. We had a business plan slide along the way when we finally raised some angel money that's very accurate to today and it was a little bit what's the history of storytelling and communication. that history of communication was the mail system, voice, texting, maybe video, but in sci-fi, everyone was talking about the holiday deck and that immersive stuff we would see on Star Trek. We believed it and that was part of the idea behind starting Roblox. We thought 3D immersive digital stuff would combine communication being in the same place with storytelling and the rest. That's how we got our launch. and the other cool thing about the launch is we initially thought it was so fun and cool to work on. Even a fourperson lifestyle company at that time was very appealing.
**** · Okay.
**** · So fourperson lifestyle company because the first company you started you didn't raise any outside capital for correct. knowledge revolution got very far without raising any money and you sold it for what 20 million something that's when you took the sobatical that's correct explain to me what how you knew that you were being logical instead of following your intuition during this soatical what do you mean by logical I think logical goes to what are what's someone trying to optimize for at that time I had been a CEO and so in a way I was optimizing for being another CEO and dropping into CEOness when in fact a lot of the magic of knowledge revolution had been about inventing new stuff and that was for some of the early knowledge revolution people and myself that was our superpower. It wasn't just that being a CEO thing. So when I came out of knowledge revolution I went and looked at a bunch of CEO jobs. That seemed the logical thing. Wait, applying to be a CEO of a company you didn't start.
Founder vs CEO Mindset
**** · That's What a mistake, **** · What's your distinction between the difference between a founder and a CEO?
**** · Although I learned at that time my founder mode from knowledge revolution. I couldn't find a position. Obviously, it was a mistake to be looking for that type of thing that was much more of a founder.
**** · You're a world builder. That's **** · No way you're going to jump into somebody else's world. What you're describing is a vision I had one night where I was on this path and there was this big barrier there, but this path which was more worldbuilder creators is boom, I got it. And that's when Roblox started.
**** · Okay, we got to pause here because there's almost a paradox between you. So I had dinner with Honam who's been one of the earliest investors in Roblox. Guy's been telling me about Roblox for as long as I've known him. Think he's been involved for, a decade and a half. and he's "The thing about Dave is if you ask Dave the time, he'll build you a clock." Some of the most unique descriptions of another human being I've ever heard. So, you're known as this really, essentially eccentric genius systems builder. But then I watch your talk at Stanford and all you're talking about is following your intuition. Can you reconcile those two things for me?
Building the Clock
**** · They're both very valuable. And so I would say that early CEO lesson was definitely a sign of not following my intuition is logically be another CEO rather than follow my intuition and build roadblocks. I would say combining intuition with tenacity and taking the long view. If those things can coexist, it's super powerful. And I think along the way with ho for example that metaphor of building a clock. It's funny because when we started Roblox we used to joke we want to start a perpetual motion machine. And what is a perpetual motion machine? It's something that can keep going get better and better. That's what the notion of building a cloud 3D UGC system. If we keep building that system, creators are going to make more and more amazing content. We can keep tuning the system and we'll get that perpetual motion machine. And the metaphor of that clock thing is really interesting because if we dive into that, it's harder to build a clock, but if you ask me the time every day for the next 20 years, it's probably easier to build the clock than to tell you the time every day for the next 20 years.
**** · And that was part of the thought behind Roblox.
**** · I was just on stage at an event with my friend Eric, who's the co-founder and CEO of RAMP. When I looked over to my I noticed that on the sleeve of Eric's jacket, it said, "We win when our customers win." RAMP is the presenting sponsor of this podcast. And the way that RAMP helps their customers win is by helping you save time, save money, and grow revenue. The median company running on RAMP cuts their expenses by 5%. The median company running on ramp also grows their revenue by 16%. So when you're running your business on ramp and your competitors are not, you have a massive competitive advantage that compounds over time. Ramp is the only all-in-one platform designed to make your finance team faster and happier.
**** · Many of the top founders and CEOs I know run their business on RAM. I run my business on RAMP and you should too. Go to ramp.com today to learn how they can help your business save time, save money, and grow revenue. That is ramp.com. Okay, let's go back to where you were saying it was the idea behind Roblox.
Lifestyle Startup Phase
**** · You had the sobatical, you start Roblox, there's four people you described as a lifestyle business and going into that.
**** · It's interesting. I think the lifestyle business could be a metaphor for having no expectation and being so excited about the area we were going into. It was a validation of our intuition. we're going to go do something enormously both fun and something on our business plan it could be really big but it was at the time so fun we I think we're thinking we'd be very satisfied if we could work on this for many years what happened is it got a life of its own and it just the responsibility got bigger the second we were live we could see this thing is going to keep growing what was the original product.
First Product Failure
**** · There was an original product that was an incredible failure. So, and the original product that was the incredible failure was arguably us knowing we intuitively knew what the viral product would be. We knew the viral product would be online in the cloud, multiplayer, digital stuff, physically simulated, access anywhere, user creation, build cool stuff. We knew that. We wanted to get something out sooner. And so what we tried to get out, which luckily was along that trajectory, was something that was more of a singleplayer puzzle builder type game. We we thought, "Oh my gosh, if this puzzle game thing gets viral, that will give us a little bit more runway to build the four Roblox." But as you can imagine, that single player puzzle type game is not quite as fun as multiplayer immersive 3D with your avatar going with your friends and doing all of these things. So, sure enough, within a couple weeks of that, we're just "Yeah, we knew it. It's not going viral." what are we gonna do? So, how do you get from the single player puzzle game to building a platform?
**** · Just deep breath, six more months of engineering. Let's go.
**** · What does the team look in the six months? Is it still full of people?
**** · Initially, it was just Eric Castle and myself and then John and Matt Dusk were just coming on board. So, that decision happened when it was two of us.
**** · And you had raised any money?
**** · Nope. Just having a good time building this thing and funding it yourself.
**** · Yeah.
**** · You said something very interesting.
**** · It's we started this with no expectations. Say more about that.
**** · After selling knowledge revolution and taking my 2-year sbatical, I tried that, that CEO thing when I wasn't using my intuition, then I came back and the revelation was almost so big. Just oh, I could work on invention fun and inventing roadblocks. What a luxury.
**** · That is such a fun luxury. I could do that for my whole life. And so I think I think that was more coming off of that other linear track just being so pleased with it. Obviously the second we started going a lot of other instincts kicked in the responsibility how big can we make this that the second we saw the perpetual motion machine starting to work. That was really interesting.
**** · When it was just you, your co-founder and these two other people, were you using the term perpetual motion machine?
**** · I was using it. Yeah. Where'd you come from?
**** · Perpetual motion machines in physics are even now if I go on short form video platform every once in a few months you can see some crazy mechanical gadget that if you look if you look at it they'll say what the water falls out of here and that falls out of here and it's a breakthrough in physics and the machine will just go forever. that's what a perpetual motion machine is. They've been around for hundreds of years. Obviously, it's physically impossible. thermodynamics, more energy in than out, friction. No perpetual motion machine ever works, but it is it is this interesting moniker for the notion. Are you building a system that will have a life on its own? Will it grow on its own? I think in the in the context of Roblox, is it something that will organically gather traffic rather than buying traffic? And in that case, the content on Roblox was perpetual. It was made by creators and the acquisition of users was perpetual.
**** · And that it was word of mouth.
**** · You're how old when you started Roblox?
**** · 20 years ago roughly. So early 40s.
**** · Very fascinating to me that you're I want to build a perpetual motion machine. Something that has no end.
**** · Something that carries on forever. Did the next company that you want to build is going to be the last company you work on?
**** · I did. One things that that Ho Nam told me about you is he has unbelievable patience and endurance and he wants to work on something for the rest of his life. Yeah. But you knew that in your early 40s.
**** · I think I knew it in my 20s because I think and I think I knew it even very early on when I was programming Apple 2 stuff. For some reason I intuitively wanted to build world simulations. And were you playing these games Civilization?
**** · I was more building them. So when I was hacking up Apple 2 code, I always wanted to build how do we simulate reality type games. And then when we built knowledge revolution, that was arguably a two-dimensional world simulator. I would say video games have historically been more about how they look. I was pulled to not just how they look, but how they function as well and what's how much fidelity can we get out of it. So I was really interested in that when we formed knowledge revolution. It was very early in the days of simulating physics on a computer and it was in there were papers in sigraph at the time very early algorithms of how you do collisions and all of that stuff that we had to pull that research out to build that knowledge revolution physics simulator. And I would I would say that instinct carried into Roblox as well.
**** · So, I would say when we sold knowledge revolution and we started Roblox, I was thinking that immersive 3D physically simulated stuff should have a 20 30 40 50 year trajectory.
**** · what's confusing to me? having that understanding so early and then yet you fell off your I think this is really important for people listening. It's fell off your path for 2 years where it's the chance that you're going to build something that you can work on for 30, 40, 50 years. Professional motion machine and that was created by somebody else.
**** · It's not going to happen. You had to build it from scratch the way you wanted to do it.
**** · That's **** · Okay. So, I got I got lucky. I fell off that and got back on it.
**** · God damn You got lucky.
**** · Yeah, I think so.
**** · you made definitely made the decision. So, wait, let's go back to you. Now, you're building we're not going to do this single player puzzle game. We started Roblox, but who's creat you knew it was going to be a platform from that point?
**** · We did.
**** · Okay. So, but who's making the games?
**** · At that point, we had four people. Matt and John joined Eric and myself. John was a really good game maker. And so, then we have we had a little bit of a warm-up phase where John made a couple very famous first Roblox games Classic Crossroads and Chaos Canyon. They were really pretty fun and they tested the system. So, we had in-house creation. The three of us are coding.
**** · and then we had some users starting to play on classic crossroads.
Buying First Users
**** · How are you getting them?
**** · Really interesting. I don't know what entrepreneur I heard this from. They said, "Look, just go buy 50 users a day from Google." that's it. And you can buy them for a buck a buck a user. And so, we said, "Oh, that's a really good idea. Let's go buy 50 users a day."
**** · That was the germination of all of Roblox. If we were able to reverse engineer the whole social graph tree all the way back to the starting of Roblox, we'd probably see a one month period, times 50 users times 30, probably see 1,500 users that were saw some ad online building game, come try it out. That are the initial social graph of everyone on Roblox. Now, in the afternoon, the four of us go online.
**** · There's maybe third 20 or 30 people just hanging out in these games and we're watching them. We had been making those games with Roblox Studio, which was our creation environment. And we were in a rush. When can we publish the full closed loop system? The closed loop system is anyone can download Roblox Studio. You can make an experience. You can push it live.
**** · There's a page where you can see all of the experiences. You can jump in and start playing that. And that's a, that's a a closed loop perpetual motion machine. So, we're we're just okay, we got to get this studio thing out. what's going to happen? We don't know. I hope someone likes it. Blah blah. We got about 1500 users.
**** · So, you go from you're trying to get them from being users to creators.
**** · That's And then a few years later, which I want to talk to because people I don't think many people know that the size of businesses people are building on top of your platform. So yeah, they're they're massive. Now at this point where we're on the story, you're turning your users into creators.
**** · And it happened very virally. So there's a day we were in a little office on Chestnut Street in Menlo Park, the four of us. It's okay, it's in the afternoon. Let's push Roblox Studio Live, see what happens. And then probably around 3 or, we started seeing our Oh, someone just published something. Look at that. Look at that.
Studio Goes Live
**** · Oh, someone published something that other people are playing. Oh, look at that. Oh my gosh. Now there's 20 things published and that has a bunch of people in it. Oh my gosh. And so we went home that night just going, "Okay, closed loop viral system." these are users now that have way more word of mouth than anything we're buying. This system is growing on its own.
**** · Why do they have way more word of mouth than anything you're buying? Because they're telling their friends to play the game that they made.
**** · They made a game. The variety of the games. All of a sudden, there's a hundred different things. It's not the boring stuff we made. for the existing users, I'm seeing something new every minute rather than this boring stuff we made 3 weeks ago. So, new content, breath of imagination, creators bringing friends, all of those just viral.
Roblox vs YouTube
**** · What do you think when people compare Roblox to YouTube?
**** · I think it's it's interesting. it's a little different. And I Well, you're Roblox is inherently social in a way that YouTube will never be.
**** · I think there are there's both consumers and creators, but you hit it exactly The comparison I would say to YouTube would be a just difference between the phone system and reading a magazine. reading a magazine on a cloudy day 50 years ago, you can do by yourself. On the phone system on a cloudy day, you call your friends in the, Beaver Cleaver 50s and say, "Hey, what's up?" thing.
**** · And so I feel the difference is they're both content platforms. The content in a video platform is typically solo.
**** · I'm by myself when I watch YouTube. I don't watch other people.
**** · The content in Roblox is really a scaffold for communication and being together. We So, is this a game platform or is this a social network?
**** · We've said we have slides in our early business plan showing two viral loops rather than one viral loop.
**** · What are the two viral loops?
**** · So, in YouTube there's a bit of a content viral loop. The better the content, the more retentive it is. and they, they have very thoughtful ways of everyone finding good content. In Roblox, the viral loop is both the quality of the content as well as the users being with each other. So, there is both a content viral loop and a communication connection viral loop.
**** · I've heard that other platforms, other messaging platforms see you guys as a big threat. Snapchat is one I've heard because there the user behavior on Roblox is yeah I can play games with my friends but it's the use case I've seen is they'll come home from school you your younger users and where do they when we were kids we'd get on our bikes and go find the other friends they get on Roblox and all their friends are there but sometimes they're not even playing the games they're just sending messages to each other I would say it's interesting what's the utility of messaging even very visual messaging or ephemeral or non-ephemeral messaging versus immersive 3D and in a way I don't think we think of it in terms of how much time doing this versus how much time doing this I think there's a natural evolution of a wide range of types of platforms we've seen natural evolution of text natural evolution of photo type messaging natural evolution of short form video these categy stories. I think we think less about we're comparing with the time of this activity and I think we're typically saying how can we increase the quality of this experience our niche is immersive 3D coexperience how can we make it better we think it's a naturally emerging niche and I would say we feel the spec of our product has a long way to go Roblox is a very primitive product relative to what will be possible someday.
Beyond Games Vision
**** · What other co-ex experiences besides games take place on the platform? Now, we have all kinds of organic things popping up. There's arguably, of course, concerts, music that's starting to get, we're starting to see more and more of that be done organically rather than oursel, So, I think Bruno Maro showed up on one of Jandelle's games without us organizing it. I'd say that's a good sign of PL. I think Bruno was the peak concurrent of music anywhere on any immersive 3D platform and it was within a game. I think we're early signs of shopping, early signs of who knows, someday older people are going to go to church on the platform. older people are going to work together on the platform, older people are going to do other things. I think the natural evolution of a communication platform is what are the ways people use a communication platform.
**** · One of my all-time favorite quotes is from the book 0ero to1. It says the single most powerful pattern I have noticed is that successful people find value in unexpected places and they do this by thinking about business from first principles instead of formulas. This is exactly what apploven has done with their new advertising platform Axon. Axon is the most powerful advertising platform in a generation.
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**** · And most advertisers aren't even thinking about this channel yet. Less than 1% of advertisers have access to Axon. So you want to get started quickly and you can do that by going to axon.ai/enra.
**** · That is axon.ai/enra.
**** · I still don't think I understand the total depth and breadth of your vision. So if I come to you and I don't know anything about Roblox and you're the systems designer and I say okay explain to me what you have built.
**** · Yeah.
**** · Take as long as you want with this question.
**** · If we had to talk super expansively I would say look there's a continuation on the human development of how we communicate. we said earlier it's a bit the hollow deck now. The hollow deck that we're building is very primitive. It's not photorealistic yet.
**** · You don't go inside of it yet. but you do go into a 3D environment. mostly that you could imagine or think about or build. You can go there with your friends and play hideand go seek. You can play a traditional game. You can be in a fashion show Dress to Impress. all of the places you go in the Holiday are made by a creator community.
**** · We've incorporated an economy into this system. So the vast majority of people who go do that for free. our creators though are very thoughtful and savvy and they come up with interesting, ways to spend money. So when we go into dress to impress and go into a fashion show, there may be something I can buy if I so choose it. and they in a way our creators because they have this platform are able to innovate new types of things that we think of sometimes as games or experiences. it's it's funny that the top hits on Roblox recently have either been fashion, dress to impress, or grow a garden. it's that's pretty cool.
Roblox Operating System
**** · Okay, but explain how you built the world though.
**** · Behind the scenes, there's a massive amount of technology in Roblox. this is to make it seem as transparent and easy as it does. There's a there's an under layer we call the Roblox operating system which is the company that's then building this Roblox thing.
**** · And in line with system thinking, we think of our company as the system. And the company Roblox is really running almost as if it's nine separate companies. They are all very well connected. We all get together once a week and connect all these companies together. There is a 3D cloud simulation and tool set company running within Roblox. There is a mini cloud infrastructure company running with 40 data centers and hundreds of thousands of computers. All why did you decide to do that? We initially we just wanted we were pretty naive and so rather than going down this cloud path I would say when we were starting Roblox AWS was just starting to be a thing and S3 was just starting to be a thing we the idea initially of building it our ourselves five years later I think that's when there's a lot of discussion about this company's all cloud this company's all build it themselves thing. We at that point started to see building infra ourselves as being a cost benefit and a scale benefit. And so I would say our we're great partners with AWS and GCP and others. We do burst into those platforms, but for at the scale we're working and the cost we're working, we do this very efficiently. all of Roblox runs for less than a penny an hour for every person around the world and that's super critical. but so yeah and we can go in deeper but Roblox is really n let's go deeper. I want to go back to the nine companies cuz this is stuff this is what I meant before we started recording. I was you got all this crazy [ __ ] in your head that I haven't heard in any of the podcast. We got to find a way to get it out.
**** · So we are so underneath Roblox operating system. it's how we run the company. We have a group of engineers working not on Roblox but on the Roblox operating system. looking at who are the various teams, how we're organized, how we do all of our things in the company.
**** · Hold on. Back up. Back up. You have a team of engineers working on the Roblox operating system, which is just the operating system on how to run the company, the company, building the world.
**** · That's **** · Okay.
**** · Yeah.
**** · Because running the company efficiently is the most powerful way to then build this vision. So, I won't go into the extent we use AI acceleration amongst our creators, but having all of our engineers.
**** · Why won't you go into it?
**** · Well, I don't want to say anything non-public, but I would say that is in line with Roblox operating system. How does every engineer, product manager, data scientist, designer work in optimal ways? How do how does the leader of an individual group that game engine cloud thing, how do they operate almost a mini CEO?
**** · How do they run that vertical stack?
**** · How do they control the types of engineers and product managers, how they compensate them? That's a really big part of how we run our company. And I'd say that the common thread of what we try to do is have as much autonomy on these groups or companies within and then simultaneously horizontally just continuously try to connect it together.
**** · So we have lots of groups who can go and do things very quickly on their own and then we glue them together constantly.
**** · How did you come to the design of the way you have the company operating?
**** · There was a pivotal moment a long time at Roblox where we were running it as three horizontal stacks. We were running it as the web stack and the infrastructure stack. And what we would see is, someone's working on a specific feature the social graph, they would have to go and try to get enough bandwidth out of the web stack and the infrastruct.
**** · So there's always a negotiation amongst that and it was hard to say who is building the social graph. So there was a rotation of that where we said no someone is going to be in charge of the whole social graph userfacing components a web component infra and all of a sudden we got a lot of acceleration because they could load balance between all of those pieces. So that lesson's been with us today and it runs recursively. So within our for example this one group or company I've been talking about the game engine group that is subdivided into smaller pieces that also run in that same way.
**** · Essentially you created a series of primitives.
**** · Yeah.
**** · In a way we're we have primitive system for how we run the company recursively from groups to teams to pods and we've tried to make that somewhat an accelerant in how we build the business. But the way you think about this these nine you think of them as almost individual companies inside the company. Is that the term used?
**** · we call them groups but the leaders of these groups we want them to feel that autonomy of as much as possible running a pseudo autonomous thing that intersects with each other. And it's almost we would have a game engine simulation company talking to a infrastructure cloud computing and storage company. They work with each other. This sits on top of that. But it's we want as much speed and autonomy in each of these groups.
**** · Say more about how this is organized.
**** · This is very fascinating.
**** · Yeah.
**** · Yeah. Yeah. No, we executive staff meeting every Tuesday. We get together four or five hours. Leaders of all these nine companies come together. We go through the things they're working on by themselves, but we go through a lot of times of all of the horizontal things that are bringing them together.
**** · What do you what are the horizontal things bringing them together?
**** · It's funny, but we track at a a ridiculously high level of fidelity even in our executive staff meeting. So we, we have probably 50 to 60 things that are core to hitting, the objectives we have this quarter, next quarter, the rest of the year. It's almost a hand curated list at the company level and group level of things that we think are emblematic as a way of our success. And every week we have all of the key leaders of all of those groups come together and we just go through all that list of 50.
**** · So who's in this meeting? It's these nine people. They're reporting directly to you.
**** · Some of them report to me, some report to some with without. But there's probably we'll bring in a few other engineers as well. So there's probably 15 or 18 people in that meeting. and we spend an hour just No. What's the You got to explain that.
**** · Key deliverable one through 50 this in an hour.
**** · It's 2 minutes. It's one to two minutes an issue.
**** · just I just recorded with Evan Spiegel, founder of Snapchat. Yeah.
**** · And his he was explaining his design meeting and he says I forgot maybe an hour or two hours after listen to the episode back, but he's we'll go over hundreds of ideas. We just go through it really really rapidly. We have our core list that goes between 50 and 70. They cycle every month or two or three or four. We're constantly putting new things in.
**** · How do you keep track of all this?
**** · We have a pretty good office of CEO team. We have the Roblox operating system. It's got some software in there. my office has, Stratops people, senior people who work with me to do this on the side. So, it's very real time.
Nine Companies Inside
**** · Okay. Can you say more about these nine separate companies? I think you just described two of them.
**** · Yeah, we publicly talk about all of them. So, I would say there's there's a people systems company that builds the Roblox operating system and has all of our recruiting and people and performance management stuff.
**** · There's an infrastructure company and that's running our 40 data centers and all of our compute and bandwidth persistence. They're building out cool persistent systems as well. game engine simulation tooling and Roblox studio sitting in a group or a company.
**** · There is a group called the economy group. It's all of the things around how we have Robux, how we monetize, how we collect money, the ledger, all of that. There's a very large group, arguably the largest safety and civility group, engineering, product, policy, and live ops under a single threaded leader, chief safety officer, Matt, who can just run that whole thing and make decisions. There is a userfacing group that is all involved with social graph, virality, the various apps we have for having Roblox run in different places. So it's a wide range of these user group.
**** · Does all do all nine of these companies have the singlethreaded leader?
**** · Some of them are still matrixed. many of them are singlethreaded. We do have some leaders that run have engineering under two of them. So it's not absolutely perfect and in some of these are better run by maybe a product person than an edge person. But generally there's one or two leaders for each of these groups that we know exactly who it is. Do you think that will be the case a year from now?
**** · I think so. Yeah.
**** · Okay. So, you don't see the need to change that?
**** · No.
**** · So, let's go back. This is very fascinating. Essentially, you're you've designed a system.
**** · That's **** · Which is your company to design another system, which is the platform that you're building.
**** · That's exactly **** · I still don't understand the jump. So, within a couple hours of letting people start building their own game, so now you're turning users back into creators. That's **** · But there's no economy there. There's no Roblox. Pure fun. and you're not there's no revenue of the company at the time.
**** · No revenue pure fine.
**** · Okay. So what is taking me back to your decisions? You're seeing this oh we're on to something. This is going to work. What's your next thought?
Safety and Monetization
**** · So then what starts happening is Roblox started a persistently viral mode. we could track the growth day by day, week by week. It's this is organic growth. This is not paid acquisition. It's just we're sitting back and watching that. We then the funds started being there. It's just 10 concurrent, 100 concurrent, thousand concurrent, 10,000 concurrent.
**** · Creations are getting better. We know everything we do with Roblox Studio, the better Roblox Studio gets, the more viral it is. The better the game engine is, the more viral it is. very early on to Eric's credit I think on week three or week four in the afternoon when we're now we're sitting there we know the names of a lot of these people there's hundreds of people Eric said we need to build the first safety moderation system and John and Matt and I all look at it and say you're he's oh my gosh we got to get on this thing.
**** · So along the way we build a moderation system. We have user reporting all of that for a long time.
**** · Matt and Eric and John and myself we were the moderators we would switch off. So we got to get a vibe of that and so this keeps marching on and then finally we say okay how can we start making some money on this thing? it's growing we have costs all of that. interestingly enough, this is another example of we had a big intuition around virtual economy. We said, we can get this out a little faster if we build this club membership thing. that at that time, Club Penguin had a club membership. Can we just charge people five bucks a month for something?
**** · So, we worked on that for a while. And so, we had this thing called Builders Club. It was fun. and we started monetizing. Exact same thing as when we started. We had this really fun moment where I was on a camping trip and I could check in how many people are buying builder club every day. First day it was five and then it was four, then it was six, then it was three, then it was eight, then it was 15. So we're "Okay, we're monetizing. This is great." and so, Builder's Club keeps going and then for about a year or two, because it was working so well.
**** · Wow, it's just all viral growth, viral builder club is starting to work. Let's just keep working on the system, making it better and better. It was interesting though, just in the early days when we started the puzzle game and then said, "Finally, the market has shown us that's not the ultimate system. let's build what we really believe. Something very similar happened with the builder club and we entered this interesting period where user growth was going this but re revenue and bookings was going this. And so what that meant is Builder Club was getting a little old and stale and for the wider range of users it was really not the thing. And in retrospect, it's funny cuz when we started the company, we use taglines you make the game.
**** · And that's a really good early tagline.
**** · It's aspirational.
**** · Everyone's making games on Roblox. That's definitely not the reality of, a billion users. And in a billion users, communication for many people would be very important without having to make a game. there's a lot of people that just want to show up and play something.
**** · Yeah.
**** · I think you now you said you last number I saw you have I don't know 150 million daily active users or something. 140 whatever the last public number was. Out of those 150, how many are building games? 150 million.
**** · I don't know if we give out our latest Roblox Studio numbers, but it's definitely a lot of people, but it's it's not 10 million. It's one or two million. And I would say the good news is that vision may return because I do think over time with AI acceleration and all of the things we're working on just maybe in the very early days of video or YouTube was mostly consumptive. there was a little bit of this early cons creation and then with short form video I think we much more everyone's starting to make videos. I do think there's that potential for something Roblox.
**** · Yeah. Especially if they can do it in natural language.
Robux Economy Loop
**** · Exactly.
**** · So along the way we had this revelation that well maybe the way reason builder club is getting tired is not everyone wants to be a builder. A lot of people just want to have a lot of fun. And so we had also a big intuitive vision. What would really be cool another perpetual motion machine is virtual economy. And people spend money they buy Robux. If we can allow the creators to figure out all the different ways someone might buy Robux without hurting their experience or making it any less fun, then a small portion of users will buy some Robux.
**** · They'll spend it in the game. The creator will accumulate those Robux in their Roblox bank account. they'll cash them out for real money and that should create another perpetual motion loop.
**** · Interestingly enough, we had a lot of board discussions is that a good idea or not? And the the board came around I was probably the biggest pusher of it because I believe some people who were hobbyists would then be able to go and earn a living.
**** · you could go from hobbyist to earning a living on Roblox if you could do this. So we did that very similar to the Roblox studio situation.
**** · We had a full closed loop system. And the closed loop system means I'm a creator. I can make a game or an experience. You can buy something extra for Robux. Could be a flashlight for something. As a user, I can go buy some Robux with a credit card. I can buy that. and also from a discovery standpoint, we started showing top games where people are spending Robux. So, same thing within about an hour or two of going live.
**** · Oh my gosh, that's the top game where people are spending Roblox or Robux. More people went into that.
**** · And that's going to scale with visor growth in a way that the builder's club would never. And what we hit is an elegant, economy that pretty much scales more than linearly with ours And what we have found without, still optimizing generally for engagement and retention, not for money, is that developer incentive to balance engagement and money. if everyone needs to spend money to have fun, your game isn't viral. so creators have figured that out and so that's been another perpetual motion machine.
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Creator to Entrepreneur
**** · You launched this second perpetual motion machine. This virtual economy, this currency, a virtual economy. How many years into Roblox?
**** · Very early on. It's got to be 15 years ago.
**** · You've been building this economy for 15 years.
**** · That's Is there some another flywheel where it's okay, I was making games for fun. I'm a user. You turn me into a creator. That was all fun. Now you're turning me from a creator into an entrepreneur. Therefore, now I have I'm making more money. I can also It has to increase the quality of the games. Quality's gone up up. I would say quality is ultimately going to be limited not just by the creativity of our developers, but I also feel an interesting thing about Roblox is in the video space, the camera, the display, they're getting pretty refined. 4K camera, 4K 60 Hz display. That's a pretty mature technology relative to maybe, black and white movies with no sound 100 years ago. In the video space, in the video coex, co-emersion space, we're not there yet. we're really excited cuz there's a lot of technical people at Roblox who I think the ultimate spec is to video what human coexperience can be which is huge crowds of people 10,000 people but realistic photoreal.
Chasing Photoreal Concurrency
**** · Yeah, because now the games look shitty.
**** · We believe we're going to get to photoreal.
**** · I'm not obviously insulting you.
**** · We believe we're going to get to photo real.
**** · Isn't it crazy how far you've gotten?
**** · you hit on something about, deep in our nature. That's The fact that you don't want to do things alone. You don't want to shop alone. You don't want to play games alone.
**** · Bones of the platform are very interesting. And I think it's it's almost Roblox is very sophisticated, very technically complicated, but in a way that's the same traction one would have gotten on that early, black and white movie in a movie hall without any sound and some text between the scenes.
**** · I just I just saw something. So you the fact that you got this far with because the kids don't care what the game looks They just want to hang out.
**** · We got pretty far with black and white. no sound movies.
**** · I would, if I was in your position, I'd feel very confident investing and continuing to reinvest into this platform given how far you got. Could you imagine how big the platform could be if it's photo realistic?
**** · can you imagine 10,000 simultaneous users photorealistic on a 2 gig Android device?
**** · What's the most concurrent users? You said the Bruno Mars was the most you ever had on the platform.
**** · I think there's two types of concurrency. So in Bruno Mars, we're talking 20 million people. but those are sharded amongst copies of experiences. When we say the technical goal is say 10,000, that's in a basketball arena. And so running 10,000 concurrent people is really technically complicated. They may be all around the world talking trying to get together.
**** · And so when we say concurrency, it's it's in the exact same environment where you can see and hear every single person. This is why you keep saying that it's a it's a little secret that Roblox is an infrastructure company.
**** · That's **** · Okay.
**** · You have not yet figured out how to create the technology to go with to do what you're describing what you want to do. Correct. And that's what you're doing every day.
**** · I would say part of the job being interesting and fun is I think we have a reasonable idea of how we're going to get there. And so no time frame, not saying when Roblox will get 10,000 user photorealistic, all of that, but I think technically we have a reasonable idea of how we're going to get there. That's exciting and very hard to compete with.
**** · We run the company in a way. it's interesting. we're in a we've been in many crazy times, We've been in the PC revolution, the web revolution, mobile revolution, crypto revolution, AI acceleration revolution.
Imaginary Competitor Mindset
**** · We have to run the company almost as if we're imagining a virtual other company who really loves this space. So, we have an imaginary competitor. So, we think about running the company that way. Michael Dell said this exact same thing on this podcast. where I think 5 years he stood up and he's there's a company that's going to be doing going to compete in every single area we're in. they're going to be doing they're going to be faster better than us technology. And he goes and we're going to be that company.
**** · That's **** · And he believes in even if you don't have a crisis, you make a crisis.
**** · We have to we have to look over here at that imaginary company and then be that company.
**** · Very similar to how Dell thinks. I just did this episode on Elon and he said the same thing. He's even when we're it looks we're going to win, I always assume that we're losing. You keep that mentality. I want to go back to okay, so you stumbled in now. We're a couple years into Roblox's history. Now you have this virtual economy. You can see that it's going to scale way better than Builder's Club.
Capital Efficiency Playbook
**** · Honam, again, I want to read this tweet because, I've got so much information about you from him. And he says in the early days of the journey with Roblox, a nextgen Roblox received $500 million seed round prior to launch. Company was called Improbable. Ho is a spicy guy. So he was aptly named.
**** · Does Roblox used less than $10 million of equity to build their business to cash flow break even. Is that true?
**** · Yes, it is.
**** · Okay.
**** · And then you reinvested billions in your history of the free cash flow in the coming de in the coming decades from that competitor of this vision that you're talking about.
**** · That's **** · Okay. So, and then his point was 500 million that seed round of this competitor that died nothing over the long run.
**** · I think they're still around doing military simulation. I think the reason it was 500 million I think that was at the peak of VC I think it was Masan or whatever.
**** · Oh god. And that was just that's the check you get. Yeah. so sorry there's no hundred million, there's 500 million.
**** · So talk about how you were so efficient. 10 million to get to break even.
**** · Yeah.
**** · How'd you do that?
**** · I think we've always been very good at product management of the surface and always been very good at doing the minimum viable, walk almost through the space so that do less take the long view, know where we're going, get a lot of stuff on the way. I do think we're pretty good at eliminating distractions. So, we're we're going down the path and I think we do that pretty well.
**** · What are the some of the distractions that you avoided are eliminated?
**** · Oh, man. there's just it's it takes a lot of hubris to build platform because I think everyone it's so fun to build content we all want to build games and stuff and big complicated features and a lot of times the features our creators need are boring and purely performance-based and we have a saying in the company per performance is a is a growth feature and we put an enormous amount of work on raw performance features scale features those things that takes a lot of hubris so what's a raw performance feature we watch how long it takes on a wide range of devices when someone clicks I want to play that experience to the time till they're interacting and the vision would the video we've come to assume on in video in short form video I can just scroll through we're used to that gaming has traditionally never had that gaming has traditionally you download or you do this loading screen you have this background thing people love I text you or something let's go try this okay we're in people that without maybe knowing it So, we just made the decision we want to get the time to jump into any Roblox game down to zero And that's very technically complicated. but we do believe it has long-term growth aspects to us.
Performance As Growth
**** · Okay.
**** · So, you have this engine that is you're now making money, You are staying focused on just building this perpetual motion machine. You're not going on these other side quests. And if I'm understanding what you're saying correctly, then if you just limit your investment to things that make the user experience better, that will lead to more money, more user growth, more money, more you now you have this other flywheel going on very early. That's **** · Trying to figure out the line of my questioning is just how the hell did you only burn $10 million?
**** · Yeah. We got viral very quickly and then we started monetizing very quickly and then you were just very careful what you used the company money for.
**** · That's And we did rate we had secondary we went public. there's a certain amount of financial prudence where I think we didn't spend any money but we always made sure we had enough cash along the way. and so, if we if we raise a secondary round, we might put some padding in there, but we never dipped below that initial 10 million.
**** · I heard from Ho and I think other people you were very careful when raising money. It was almost they had to slowly commit. You kept saying no, no, no, no. with some of the VCs we talked to, we definitely in that sense I think we did a really good job intuitively connecting with Golong VCs and we really we got very fortunate whether it was Altos or Greylock or Index or others that in a way we got VCs I think who could risk it all who could not oh my gosh this one of my first deals what are we going to that could really go long with us and I think that was very helpful. So why was it important? Was you were just worried about dilution? what was Are you a control freak in some areas? Probably. Yeah. the more hopefully in other areas not.
Owning The Stack
**** · No, but you pretty vertically integrated. You to control everything. you've built it own data centers, your rendering systems, your AI creation tools. you're funded by operating cash flow. I think there's areas of my life where hopefully I've decided not to.
**** · We're talking about work but for roadblocks no knowing what we're building and I would say it's not just control. I think it's in a way hinging our destiny in a way. So I would say building data centers is Yeah. But the only way you own your destiny is if you maintain control, **** · Exactly. So data center cost, performance, control. Yes. What other areas of the business are you that with?
**** · Our game engine, for example, we said we always imagined we need a multiplayer 3D immersive engine that does 10% of everything really well. Early on, it's you should use that game engine, you should use that game engine. Said no, that's a critical core part of our whole platform. We have to build that ourselves.
**** · I think you just building things.
**** · We do go back to your description I built an operating system I built the company and then I built an operating system to operate the company.
**** · Yeah. It's interesting because we we're going to be building some other interesting things that we just decided on.
**** · Oh, of course. But did you do you see where I'm going with this? It's I want to tie that natural in inclination or propensity you have for we're going to call it control for the time being to also being very careful not only how much money you raised but who you raised it from. Is there a connection there?
**** · There might be a thought around efficiency, growth, control because you can control your destiny.
**** · That's And there's many components of our stack where we went exactly the opposite way and we said we don't need to control that. very in the game engine business 15 20 years ago what audio system are you going to use? We'll use FOD. Everyone use it. We'll plug it in. So we don't build everything. when we feel we can plug that thing in and use it, we'll go that way.
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Roblox Infrastructure Engine
**** · Let's go back to this idea that I've heard you say a few times, and I want to understand more deeply that the dirty little secret of Roblox is that we're an infrastructure company.
**** · That's **** · Okay.
**** · Explain this. running Roblox behind the scenes is very complicated. So, when grow a garden hits 20 million people at the same time, there's a lot going on there.
**** · That's 20 million people all around the world. They're playing on a phone, a tablet, a computer, iOS, Android, PC, Mac, Xbox, PlayStation, MetaQuest. They are running translated versions of that experience. They are hitting very quickly on Roblox bandwidth. they are connecting to data centers in Poland or in Singapore or in Brazil. they are connecting to our core databases as well. And running that is very interestingly complex. Running a a 3D simulation cheaply is very complicated.
**** · I said a penny an hour. So that is part of why our infrastructure costs are not crazy is we can do a good job and even some countries that don't monetize very well. So we have core data centers, edge data centers and it's we're running a lot of our own CPUs and GPUs all around that. That's what allows us to do that.
**** · And you started this from the very beginning of the company. We did. Yeah.
**** · Okay.
**** · the very beginning of Roblox was running on one giant server that was over there in my office.
**** · Can you describe what you see is the flywheel of the world that you built?
**** · I think the flywheel would be akin to saying what's the flywheel hopefully of the early phone system way back in that day when AT&T comes out with the phone system. And there's there's probably some time where only 5% of people in America had a phone. But imagine the virality of going over to your neighbors, see them making a phone call across town. Oh my gosh, I want to do that, too. Look at that. And so, when we look at the phone system, it most likely grew pretty virally.
**** · there's some early adopters.
**** · They're probably really expensive. but over time everyone saw that and so I think that's how we see Roblox going a bit. there's a lot of word of mouth as the quality of the experiences grows on the platform. I think we can see correlation in growth there. And so if we can technically support what we ultimately think should be on the platform, I think there's potentially a lot of growth there.
**** · Blake Robbins is a friend of mine. He hangs out on the edge of the internet. He always finds these weird things for me and he's the biggest Roblox bull that I've ever come across. This is the way he describes it. I'm curious if you agree with this.
**** · More creators brings more games. More games brings more players. More players spend more Robux. More spending attracts more creators.
**** · If we're ruthlessly pushing forward the quality of our technology stack, our economy stack, our safety stack. So, I would say I think what he's saying is if we walked away from Roblox now, just kept the lights on, it's possible we would keep growing for a while. But that at the same time would be very, very dangerous and something we would never contemplate.
**** · Yeah. The way he described to me is that Roblox is a compounding machine with network effects and a fully functioning economy.
**** · Yeah.
**** · Yeah. Yeah. We I think we would we see we don't know what that full effect is. We had never claimed that we could walk away and all of that, but I do think simultaneously we know what we believe is technically possible and we're racing to build that.
Safety And AI Moat
**** · You mentioned safety a few times. Honam, when we had dinner to prep for this, he said something interesting that you have been essentially it's the biggest playground in the world, One way to think about this biggest playground in the world. Obviously, it's the safest playground in the world, but it's also huge. So, there's going to be some issues that come up. But he was saying the investments you guys have been making for seven, eight, ten years around safety and AI way before anybody else was. You're getting so good at it, it's a it's a moat because over time it's going to get safer and safer.
**** · That's really beautiful that he said that. we we've seen this in self-driving and we're not going to claim we're self-driving, but in self-driving, say self-driving ends up being 40 times safer than the average human. when there is a self-driving incident in the news, you don't hear that. It's just self-driving a thing. I do believe the pressure we get in a good way from the media, from this, from that is an incredible motivator for that moat.
**** · We the vast majority of what we've done on safety and stability, we've done on our own in a visionary way. I'd say age check. We made the call on our own. It's not because of laws or anything that, but the ultimate mode and the ultimate belief of what is going to be possible. We're going to know the age of everyone. We have AI systems watching content, watching communication. We're banding things.
**** · We're not sharing images. All of that. It's an enormous opportunity. And I think we more and more, we're starting to say, look, we know what the gold standard for safety is. We're building it. We're pretty far along. We're starting now to see other companies say, "Oh, maybe we should do what Roblox has done." We're seeing more and more governments say, "We where you're going with this."
**** · "This is really cool." So, I'm I'm really optimistic about, having this force of innovation and what we're doing there.
**** · Okay. But is this something that you've been building and compounding since your co-founder?
**** · All the way since we built the first moderation system the first year in into that. Okay.
**** · Explain what can you I don't know if you can talk about this publicly what have you built to make it I think we have seen AI is more consistent over time and scales more than humans. And so the ability to run every asset, everything on the platform through AI, all content, image, everything everyone's building, everything everyone's saying and just get better and better and better at that. It's just been an enormous thing.
**** · And so when we, the part of AI is very much the humanfacing thing oh, I've got an AI prompter, I can do all of that. Behind the scenes though at Roblox for many years we were pushing very early AI BERT models primitive type models to drive safety.
**** · So I do believe it's a mode and I do believe we've done something very unique in that what's going on out there now is we're very upfront we do have people under 13 on our platform. It's an enormous responsibility. we focus on once again all of the aspects of how they play and learn and do things, but that's very different than being some other platform that says, "Oh yeah, it's okay. No one's under 13. We're good." And so I do think long-term leaning in and being part of that is an enormous capability.
**** · Something came to mind when you said, now other companies are looking at what we've done in this and hey, I want some of that, too.
**** · Would you ever sell this technology to other companies? I think it's worth thinking about I believe we will end up with the best AI tech for text for voice maybe for video doing a wide range of safety things either monitoring for critical harms flagging adjusting all of that it's not unreasonable to think we might do that we've already started open sourcing some of our stuff so there's a consortium with some various companies involved in safety we've open sourced one of our voice models.
**** · We've open sourced one of our Sentinel models. So, we are starting to go in a way down that path.
Data Ethics And NPC Testing
**** · So, the majority of the revenue that Roblox makes now just comes from this platform, this virtual economy, this world. Correct.
**** · But you have to have a million of these giant model companies coming and wanting to train their data because you have 12 14 billion. What's the hours of month?
**** · It makes it so simple, we're how many hours of 13 billion plus a month.
**** · So 13 billion of actual people interacting what does this data set look **** · So there's a lot of data sets out there that are video coupled with ASDW it's just a human interaction model. What's cool is because we're running this 3D simulator and we're running it on our own cloud and all of the experiences and games are running somewhat on the same simulator, we have really interesting data. We have 3D location of everything. We have how people are trying to move around with their avatar. We have obviously what they're texting and typing in a privacy safe way. but what's what's fun about it is we would of course never sell that data.
**** · That's what I was gonna ask.
**** · Never ever ever for several reasons. One is just from a values thing of respecting the community. Can you imagine what whacked out decision that would be? Roblox is selling their 3D user data. We would never do that. also I believe over time that this data it's going to be very interesting data to for example imagine a future where a creator wants to make a really beautiful Roblox game and have a bunch of agents working all night long iterative wigs loops recoding testing recoding testing and imagine just we do with code now creator want to do their whole game that way. So we go back to you guys are buying 50 users a day from Google. Now if you're building a game on your platform, you can use real the data from actual users on Roblox to test what you're building.
**** · There's a level of indirection there. I would say that what's the indirection?
**** · The level of indirection is making amazing NPCs that look and behave and act humans by training on that data for our users. So, what we'd to be able is you're building your cool experience. You want 10,000 virtual testers. You want to describe how they act, what they do, and put those into your experience and use that to test overnight.
**** · I that idea a lot. That's very interesting. The your stocks seems to be all over the place sometimes. Why do you think you have these huge Roblox bulls are just this is a compounding machine and then what do you think is most misunderstood about what you're building? Why wouldn't this keep getting bigger and more valuable in the future?
**** · I feel I can't predict the stock market.
**** · No. And I think though I think ultimately, it's showing I think the future for many companies is we're in a time now where raw user growth and engagement growth is mixing with a lot of factors. I think technical excellence, continued innovation, having people understanding where we're going with this. there's just going to be more and more of that. So, I'm optimistic. And you see AI as a giant tailwind for you guys.
**** · It's an interesting time, it's a really interesting time. People are questioning all types of different types of companies. What companies are going to grow twice as fast? What companies are going to this happen? For us, it's so many areas. It's not just making games better and faster. It's increasing quality, time to market of experiences. And I do think ultimately AI will power some of what we've said around our ultimate spec.
**** · Are there completely AI generated games already on the platform?
**** · I would say we're getting close. And I'd say now Roblox Studio is starting to embed a pile of AI capable type functionality. The beauty though that we have all of our Roblox cloud open to MCP server and all of that stuff. We're now we're just seeing devs push at this with AI coding tools and creator tools and start to create that flywheel.
**** · And these are these can be relatively small teams even individuals that make wildly popular games. Correct.
**** · Absolutely.
Creator Earnings Explosion
**** · So let's get something I don't even know how long it's taking me why it's taking me so long to get into this part because this is the part I'm most fascinated is the size of the businesses that people are building on the platform.
**** · DevX is well over a billion bucks a year. that's the amount.
**** · explain to people what dev and that's the amount of raw money flowing to creators on the platform. it's it's really been I'd say it's a really interesting time because in the midst of AI throughout the game industry as a whole there's been a lot of maybe logic legitimate concern about a lot of creative people of having AI displace what they do. The thing we've said is we believe that money flowing to creators is going to increase, not decrease. And so that's pretty good news. If that money flowing to the Roblox creative community is increasing, we should see even more opportunity for creators. we've also seen something really interesting. top creators on Roblox are making tens and 20s and 50s and millions of dollars.
**** · these are pretty.
**** · I heard some of them are making that a month.
**** · I don't I can't say that, but I would say they're making they say that. I don't know if it's true. I heard three kids in the middle of nowhere making $25 million a month. I won't confirm or deny, but I would say one thing when you hear that as a measure of platform health is if we look at the year-on-year growth rate of creator 1, 10, 100, and a thousand, creator thousand year is consistently growing faster than creator number one.
**** · Wait, say again.
**** · The curve is even flattening more. the growth rate in bookings per year for creator number a thousand ranked by how much they're making. They are growing faster than creator number one. How curve is flattening wider use around the world more opportunity for vertical content more opportunity for some content for older people. So that is a flattening of the curve which bodess well for creator thousand.
**** · What does the longtail look at the very end? They're making a couple hundred bucks a month. what is that $10 a month?
**** · I think the top thousand is on average making a million bucks.
**** · I heard it's higher than that. I think it's 1.3 million.
**** · Okay.
**** · And then I think as we go beyond though that curve goes way out to creator 10,000 beyond where there's significant money being made out on that part of the curve.
**** · Do you see a world you think about how in the last decade and a half, when you ask people what they wanted to be when they grow up the YouTuber wasn't even on there, 15 years ago. Now it's always in the top, five or three or whatever the case is. If you do have this perpetual motion machine, you keep going. And I think once people understand the size of the business that they could build on this and they have a love for what they're doing, you're usually only really great if you love it. I think being a Roblox creator would could displace being a YouTube creator.
**** · Who knows? I do.
**** · Why' you make that noise? There's Before Who knows? What was that noise? It's funny because I get these I get these short form videos in various platforms of really cool Roblox creators living in this giant studio driving these cool cars doing short form video about how cool it is to be a Roblox creator. I think what they're saying is if you do this there is the potential to make a great business. So what do you guys do to foster that message or foster the size of the businesses that it can be built? That's pretty viral. People know I think what we're trying to do is create the tech you said the technical infrastructure so more and more of them can bring their ideas to reality we've said publicly we want to get to 10% of global gaming on the platform. I think that means you taking that black and white film projector and turning it into a 4K projector in the in the gaming world. So we think a lot about the responsibility of building the platform for them. So the more photorealistic that it gets the wider the market gets.
**** · I think in many dimensions concurrency performance cost photo realism ease of creation AI acceleration and creation all of those things help bring ideas to reality.
**** · But out of all of those what is the most important you would think?
**** · I'd say it's load balanced So I think one of the good things we've done is we if I looked at that mix and I looked at where our engineers are working, it's not everyone is working on that one thing. We've got a balance of those things that are pushing forward.
Marketplace And Transparency
**** · Do you have funds coming in and trying to buy up these games and rolling them up?
**** · There is a market out there. I think if anything, we're trying to get the message out to our creators our Devril team can help you assess what your game might be worth cuz a lot of them are worth a lot of money. The platform itself has never tried to buy any of that.
**** · We never have. I think what we want though some transparency in the market so early creators can know what a gem they're sitting on.
**** · Have you seen people being taken advantage of?
**** · Not really. I've seen amazing profit sharing, revenue sharing, things that have really worked out for buyer and whatever. But I do think over time we want there to be a lot of transparency in that.
**** · It's almost you built a game to play entrepreneur and you turn them into real entrepreneurs in a sense. It's an entrepreneur game.
**** · Yeah.
**** · If I wanted to teach a a ninth grader about entrepreneurship Roblox might be the best place to start. You could teach them how to use AI coding tools, come up with a crazy idea, get it live on Roblox now. They could buy traffic, they could spend $50. same thing, buy users on Roblox that whole cycle.
**** · Yeah, I'd be very interested in that because when I talked to Toby Luke, the founder of Shopify, he said something interesting he thought, his job is to create more entrepreneurs. that's the way he looked at what he think.
**** · Yeah.
**** · I think it's more important than ever, especially with young people. if you look at their empathy or their they're way more attracted to socialistic ideas, than I think your generation was and definitely my generation was, especially in, in America.
**** · It would be fun to imagine an entrepreneurship class that connected all the dots. I build this, do this, can see this happening. That could be super educational.
**** · What's your biggest threat to that would inhibit you from building what you want to build? what you're describing is I feel the biggest threat would be not imagining that competitive company and not building what we think that competitive company is. So the biggest threat could be complacency rather than we can see what's technically possible let's build that.
**** · How often does this imaginary company come up inside the discussions you're having in your real company? Now and then I would say given the speed at which we think some stuff's happening it's interesting the whole history of the company has arguably been a motion from quarterly things monthly weekly daily the whole pace of our company I think has just been a historical acceleration of the pacing of the company the pacing at which you move pacing in which we make decisions pacing at which we gently adjust without swinging the tiller widely the speed at which we check in the speed at which we track things it's gotten faster over time.
**** · So the way I would think about what you've been telling me is you have this excessively long view fact that 20 almost 25 years ago you're that's one of our values take the long view.
**** · Okay.
**** · Well so 25 years ago or 20 years ago this is going to be the last company that I'm going to work on. so therefore you even said I think earlier in the conversation it's 30 40 50 year view. So an excessively long longest view in the room So we think about this with infinite number of daily iterations towards what you're trying to build.
**** · Yeah.
**** · A combination of those two totally the infinite iterations would be a complimentary value which is get stuff done. And so we say get stuff done means continuous iteration but pointing in the long direction.
Near Death Lessons
**** · So, something we haven't talked about, but I think I heard you speak I think this you said this in your Stanford talk, which I thought was interesting that there was multiple neardeath experiences or almost death experiences of Roblox. We haven't talked about that at all.
**** · There were several I think one was the economy thing if we had not figured that out, that would have been very dicey.
**** · Looking back now, you were obsessed with science fiction. There were all these other virtual economies at the time.
**** · Second Life, Second Life, their.com.
**** · Yeah. all of that stuff.
**** · So, were you taking ideas from that as well?
**** · Their.com and Second Life, they really were early and in parallel to us in a way. They were so early and so parallel.
**** · They made these very big visionary things. Second Life's architecture was contiguous Earth thing, which had some issues around scaling because in a contiguous Earth type situation, which is just the way the real world makes, there's only one copy of that roller coaster. And when 30 people want to go on that roller coaster, no more can go. So, we I think we were a lot more practical around scale. We're "No, man. If there's if there's a 100,000 copies of that roller coaster, we're going to figure out how to route people to that so we could have 10 million people riding the roller coaster. But there were a lot of early visions out there, I would say, at the same time. For sure.
**** · What was the argument from the the opposing board members to doing the economy?
**** · We had a lot of fun going on the platform. we're just whoa, everyone's having fun building, this viral stuff. would we distort it if people could make money? And but the idea the idea that look in the traditional game market you have studios with hundreds of people we could probably get better quality if we nudged in that direction. Other near-death rough things is our economy got hacked once. So we had to shut down the whole economy for two days that was somewhat scary and the reason is we had just been so early moving so fast that our the way our economy was working now wasn't double entry bookkeeping and journaling and all of that and we had no flow control anywhere in the economy. So, this was a famous economy hack very early in the days of Roblox where the second the economy was hacked, money could bounce from place to place very quickly. We caught it pretty quickly and we just said, "Shut everything down." We had to shut Roblox down for a while, then bring it back up without the economy on.
**** · Luckily, we caught it pretty quickly and only, a small portion of the money had moved around, but we had to run for several days with no economic activity.
**** · Were you already a public company when this happened? No, no, no, no. the SE the SEC does some really good stuff and I would say some of the good stuff if we go through a lot of the controls in the SEC, those were things we did 15 years ago, as far as this economy and backups and all of that.
**** · When you were designing this, were there any books you were reading or were there any examples? You're okay, I'm going to take an economy that I see functioning well in the real world and just make the virtual version. How did you even come up with the set of rules that you had? We I would say all four of us founders were very into high integrity systems. what's the amount of float in the economy, how much currency we have, do you trade it and not trade it? We saw very early on in our economy, we had something really interesting in the early days of video games, people would have multiple currencies. And we had something that in retrospect the Roblox community really loves, but isn't really a good idea, I don't think. And that is a participationbased currency called tickets as well as a moneybacked currency called Robux. We the thing that comes out is when you have a participationbased currency, you get one ticket for every day you log in. That's really not a very good way to have people log into your system. it's much better.
**** · They just love chatting with their friends or playing games. The other thing is any currency that a user can get from work or log in will immediately be botted now. And so we just we could see people trying to bot that currency all day long and we had to ultimately get rid of it. so we had some good learnings with that. But ultimately, our current economy has, as I've said, has scaled better than linear with user engagement.
Ads And Creator Discovery
**** · You mentioned there's an advertising business inside of Roblox.
**** · That's **** · How long has that been going on?
**** · It's just started, pretty recent. But if you go on to the Roblox homepage, you can see some of the experiences say sponsored. now, we have a long-term vision of what percent that is. But it's really helpful because most of our discovery primarily organic. We've been very transparent with discovery. and so one of the things the Roblox creators is we share all of the signals of what's boosting something. It's almost as if we were YouTube or Tik Tok or real saying here's all the factors that bring you up here. But for some creators who want to do that entrepreneurial experience by 50 users very early, their game isn't viral yet. They can use that sponsored thing just when we bought traffic from Google.
Closing Reflections
**** · I got one more question for you. Okay, we're almost out of time. Out of time.
**** · Are you jumping up? You want to leave already?
**** · No, I'm stretching. I want to give an expansive answer.
**** · Why do things this? Why are you doing podcasts?
**** · I do feel there's a lot of depth to the way we run the company that podcast is the format to get it out and I love podcast. in today's media, if I know who the podcast is, that's all I need to find great content. I podcast cuz it's it's typically not edited. It's not showing up in a discovery mechanism. So, so I feel it's one of the truest forms of media.
**** · Okay.
**** · I'm glad you use the word depth because what I want to do since we're out of time now, I want to run this back as much as you want me to be every six months or something that because I do these selfishly I'm obsessed with making podcasts but I'm obsessed with entrepreneurs and I want to know something Toby Lucas said to me that was fascinating. It's just there's not one way to do something in a company. There's probably a hundred ways, **** · And you have to figure out what makes sense for the context you're in and then who you are as the founder and what you're trying to accomplish.
**** · And I have a better understanding of you, way better understanding than when we started the conversation. Even though I listen to every single interview you've done, your company is very misunderstood and there's not a lot about you as a person. And yet I find these people that I respect their opinion very much and this guy is special and the way he's building his company is interesting. And I'm still I feel I just scratched I'll take that as a compliment. You should take it as a compliment. You build something amazing. so thank you very much for the time. I hope you accept the imit the future invitation and every time we have this conversation just peel one more layer of the onion of what you're building and why you're doing it. I think it'd be very fascinating.
**** · It' be fun to peel another layer.
**** · Perfect. Thanks.
**** · I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs. searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.