The InEVitable

Transcript

This isn't your average business podcast, and he's not your average host. This is the James Altucher show on the Stansbury radio network. So I'm really excited to have James Han on the podcast. You might not know James specifically, but he started the infamous site hotornot.com along with his friend, Jim Young. I just wanna provide a little intro, before fully welcoming James. But hotornot was, like, the dream site to build, I would imagine. Basically, imagine setting up a website, and then weeks later, you have millions of users, you you have minimal costs, and it turns into a business. That's kind of the dream. And, James, welcome to the show. Thank you. Now, what what was it like? You set up this site, and then and I'll describe the site in a second. But you set up the site, and did you realize you were gonna have 2,000,000 visitors within weeks? No. It was it was mainly we we put it up really as a joke. It was just for fun. You know, it was just kind of an experiment. My my friend and I, we we were hopeful, but we we really didn't expect it to happen. I don't know if you remember this, but back then there was, this whole concept of viral marketing was kind of new. And, I was kind of obsessed with this guy called the Turkish Stud. I don't know if you know who he is. No. And this and to be fair, this was in the year 2000. Right? This was in 2000. But I think Mihir, the Turkish Stud happened in 99. There's this guy who had a web page actually someone took his web page and made another web page about him that was kind of a joke. It grew like crazy, and if you know Borat, I think Borat might have been based on him actually. That's funny. We were just amused because, Jim and I, because you we were in Silicon Valley where there were all these companies spending 1,000,000 of dollars to get 10 users, you know. And at the same time, here was this guy who had a website made about him and he ended up on Letterman and all these TV shows. And we just thought it was kind of funny because this guy didn't do anything and he had all these users, come to his site. And meanwhile, there are all these people spending money who couldn't get, you know, even a few people to their site. And so we just thought that was really interesting and really cool. So we were obsessed by him and we kind of took it upon ourselves as a challenge to say, could we ever create a Mahir, a Turkish stud? And, so we were, you know, we were always bouncing around ideas. And one day we just came up with the idea for hot or not, and, you know, like, oh, you know, this could be it. Who knows? So we just built it. And, yeah, pretty quickly it was, both a blessing and also a curse to have something grow that quickly, especially back in, 2000 when things were a lot actually more expensive than they are today. And and to be clear, so Hot or Not was people uploaded their photos. Very simple concept. People uploaded their photos, and then you could choose whether they were hot or not, essentially. Basically, people, yeah, people submitted their photos for other people to judge them, to rate them on a scale of 1 to 10. A few months later, we also added a dating site, where you if you thought they were hot, you can meet them. And that basically worked how Tinder works. It was kind of the first speed dating on, you know, we click you you click yes or no instead of swiping left or right, but it was effectively the same thing. Well well and you were you were kind of the ancestor of many sites. I mean, Facebook came out of FaceMash that that Mark Zuckerberg set up. You hosted Twitter for a while. You hosted BitTorrent. The YouTube guys were inspired by you. They wanted to do, like, a hot or not of videos. Yeah. I have a a confession for you. I set up a site called Smart OR Stupid Yeah. Based on your site. Nobody really used it. I had people upload their photo and then fill out an IQ form, and you had to decide if if you thought they were smart or not, and then you would see the results of their IQ test. That's actually pretty cool. I like that. Some of my best friends, like, I don't know if you know Philip Kaplan who, Yeah. Back to PUD, who ran FUG company. He also created a, a hot or not, copycat of sorts. Says did Greg Sang of TABG and, the guys who did Machine Zone, one of the biggest gaming companies now started off. I mean, some and like I said, some of my best friends also did it. It's just kind of a quirky concept, and it was an interesting UI, I think. But it didn't really work, like, for me, for at least, it didn't really work. Like, what do you think contributed to the instant success of Hot or Not? And, obviously, I guess the curse you're talking about was, you know, storage costs and space and things like that, or or what what were the issues right then? Well, the interesting thing about hot or not versus a smart or not is that it kind of tapped into something that we as human beings, it taps into our our, you know, inner selves of, you know, we're always everyone is always rating people. It's just kind of a instinctive thing. And so it's it kind of touches something that's kind of a core a core function. Because of that, it really strikes a nerve. Like, you know, I don't go around looking at guys and girls saying, oh, I wonder if they're smart or not. Right. Which which no. Smart or not is actually quite funny and actually quite interesting, actually, because from a psychology standpoint, there's something about hotness that just made it more exciting and, you know, that's how our society is. We we're we're very, I I don't know, sexual beings. Well well and it's very it's very blunt because the reality is it's almost a cliche. Like, you are 2 electrical engineers, so, of course, you're gonna want women to upload photos and have everybody decide whether they're hot or not. Like, I'm sure you were accused of, like, sexism at the time. Sexism actually didn't end up being much of a problem because it turned out that 2 thirds of the people who submitted their picture were men. So if if you were going to accuse of us of sexism, and of, superficiality, you know, it would actually be in the opposite direction of we're we're, being superficial and sexist against men, more than women. So So so that's sexist against men, more than women. So So so that's interesting. Like, so did people upload their photos kind of wondering for themselves what people would choose? I think for a very small percentage of people, it was enlightening. But in reality in reality, most of us already know how hot we are in society. Because like I said, this is something that people do to us every day. You know, I could go out onto the playground in a you know, or, you know, into a high school cafeteria or in college or just going outside to a bar, it's not like I don't know if I'm hot or not. It's something that most people actually know that the only people who I think it was a surprise for was were the people who were somehow so egotistical that they thought that they were hot, but they actually weren't. See, I would have no problem because I would be, like, a 1 or a 2 on on or not. You know, the the funny thing is that we were in the beginning, we were a little concerned about hurting people's feelings or, you know, making people feel bad. But what we realized is that, you know, like, we thought about it, we we looked into our user base and found this to actually be, true. Kinda much like us, we're not really that hot. It's not like like I said, we already kind of knew it, so so it wasn't really a surprise. So most people who would submit their pictures that were gonna get low scores typically knew it was coming. And so they were confident, you know, only about 2% of people would actually submit their photos. So those 2% tended to be people who were either knew what was coming or were confident enough that they didn't really care. You know, like like, I live my whole life not being that great looking guy, but, you know, like, I have I don't have to make up with it make up for it with my personality. You know, my mom says I have a good personality. So and, so, you know, the the type of person who would get a low score on average tended to be, like, be able to you know, they they were able to brush it off. That's kind of what made them able to even submit in the 1st place. So so were the well, does the score skewed more towards 10? Because generally, I guess, hot people were more inclined to submit their photos. In the beginning, no. In the beginning, it was a broad cross section, but I would say that we probably retained people who were hotter on average. You know, it's it's became kind of like a dopamine hit to, get to check the score. So I would say that we were not in the business of sourcing hotter people, but we are definitely in the business of accumulating them. And and how did people initially even hear about the site or is it just pure magic? We built the site over the course of a week, kind of casually, actually. It wasn't really a thing. You know, I was working on another project and my partner was doing his PhD. So it was kind of, half time building it on the side thing. When we launched it, I sent an email to 42 of my friends. That was around 2 o'clock. And by the end of the day, we had had about 30000, 30000 people come to the site. Did you see did you see that with any initial photos? Like, did you go to some kind of Russian model site and put up photos? Because otherwise it would be, you know, they would just be looking at me and my partner, and that wouldn't be that interesting. So what we did is we seeded it with, a 100 photos. I could probably say this now. We seeded it with a 100 photos that I just downloaded off of, I think excite personals. I don't remember excite. But what it was pretty awesome was that we had so many pictures coming in that I think we took them all all the we took down all of the fake photos down within, you know, like, 7 or 8 hours. Like, that night that we launched, we're like, we don't need them anymore. So we took them out pretty quickly. So a week later, did you realize, okay, this is now my life has now changed in one way. No. Like like a day later or that it was pretty instantaneous because, first of all, we were running the site on a free machine that I got for opening an E Trade account and, you know, depositing $400 into. So it was literally or a 1,000, it was literally like a $300 machine with no memory and nothing. And, so that box was quite immediately slammed. So from a technical basis, there was just the fact that, like, we didn't have the machines to run the site. And, you know, back then there was no EC 2. There were no cloud services. Back then, you had to spend $2,000 a machine on average to, you know and $10,000 to get into a racks, you know, in in some some colocation facility. And, you know, it wasn't like it is today where you can spin something up, you know, like, you were, doing this stuff back then. Sure. You know, you remember what it was like. It was very expensive. And actually even bandwidth was, you know, I think it was about $1,000 per megabit per second. So what a DSL line did does today would cost 1,000 of dollars per month. I just remember the very first night, we almost shut the site down because I was in debt from business school, my partner was still in grad school, and, I kinda did a back of the hand calculation. I said, hey, Jim, you know, and we were borrowing, by the way, we were borrowing data center space from a friend. So I was like, hey, Jim, you know, at the current rate, we're gonna have a bill of about, like, you know, $100,000 a month, and it's doubling every, like, 8 hours. That's crazy. So we we were very close to shutting it down until, you know, I called a friend of mine, and for advice, and he's like, don't you dare shut this thing down. You know? Like, whatever you do, you can go bankrupt, but, you know, you can't this opportunity doesn't come, you know, every day. So, so we're like, okay. Fine. We'll have to work through this somehow. So what we did actually is we, we did 2 things. For hosting, we we moved the machine to my partner's grad school office. So it was very briefly hosted in Berkeley. And, we won't tell Berkeley about that. Yeah. But before that even before that for the, well, they know about it actually. They, luckily, Jim's adviser was the dean of engineering. And so he gave us a couple he got us, off the hook for a couple days to find an alternative. I'll get to that in a second. But the other thing that we did is we said, hey. You know, like, why don't we just upload all our images to Yahoo Geocities and just host let Yahoo host them. We did that, and then when we, when users were submitting the photos, instead of saying, hey. Upload your photo, we said, hey. Go create a GeoCities account, your own GeoCities account, and, just give us a URL of the picture. So that basically got rid of our cost of, serving the pictures. And interestingly enough, a month later, Yahoo shut down the ability to do that except, they somehow whitelisted Hot or Not. We weren't really sure why, but, years later, I ran into the guy who ran GeoCities and he's like, well, we didn't want to be the guys who killed Hot or Not. Well, also, you must have been the only reason people were signing up for GeoCities at that point. Well, I mean, Geocities is really popular. They had already been they were bought for 1,000,000,000 of dollars, I think. So, anyway, we we we we thought we were actually just riding under the under the noise, under the floor, you know, under the radar, but, turns out that they knew knew all about us. And we are luckily luckily so since they white listed us. But, and then actually, we took a view on that. We then contacted, Ofoto, which was, like, one of the first picture sharing sites, like, or like, it's like Shutterfly. I think Kodak bought them. And, we cut a deal with them where we said, hey. Instead of sending people to GeoCities, can we send you our users? We can ask the users if they own a camera because back then, most people didn't own digital cameras. And, if they do, then we'll send them to you for photo hosting and they paid us a dollar. So we did, like, an affiliate deal with with Ophoto in the early days of affiliate deals. And, so and and that actually ended up making us our first money. And, luckily, they fronted us 25 k, which helped us, pay for a lot of our costs upfront. That's great. So so you have no real serious cost if they were handling the the major hosting and they were paying you. Right. You're right. Exactly. That was the Foti deal. And then but and then the last, real challenge on the hosting stuff was that Berkeley found out about us pretty much instantly. We got a stuff was that Berkeley found out about us pretty much instantly. We got a couple of days because of, my partner's adviser. For that one, we called Rackspace, which was back then just up and coming and and and pretty small actually relative to today. And, I said, hey, you guys are doing really well, you know, and you guys are probably gonna wanna, like, go public someday, you know, I'm getting all these phone calls from CNET Radio and from Wall Street Journal, like, how about you host us for free and I'll just talk about you. And, you know, because back then our challenge was even if we had the money, we couldn't turn up that, you know, we couldn't meet the demand that quickly because it took the lead time on even getting a machine was, you know, 2 weeks to a month, and our demand was instant. Right? And I said, well, hey. This is kind of actually your model. Like, you enable people to scale up quickly. And so they said, yeah. That's actually pretty good. So I said, well, scale us quickly and then, they were actually great. They this guy, Lou Mormon, over there, he said, let's just scale you up quickly, meet the demand, and we'll work out the terms later. So we didn't even work out the terms until, I think, maybe a month in, which is awesome. And and in that time, we just scaled up to, I don't know, maybe up to, like, 15 to 20 machines. Every night we were just like add more machines, add more machines. That's crazy. You know, this this like never happens and is the dream. Like Yeah. It was definitely it was a dream, but at the time it was like, it was I I think I got 8 hours Were you able to sleep? Like, were you stressed? I will I literally got 8 hours of sleep the whole week. I slept about an hour a day. And I remember, like, a week into it, I was just kind of, like, nodding off and Jim was, like, looking at me. He's like, dude, you got you have to get sleep because I've been he says I basically look like I was about to die. I Okay. Let me ask you this. You're you're in the final stages of kind of the Internet bubble, the beginning of the bust. Did you consider immediately flipping it to, like, a yahoo for $10,000,000? Yeah. Actually, we got calls. I remember Ulta I think it was Ulta Vista offered us $5,000,000 right off the bat. So you didn't consider that? Like, you've been doing this for 2 weeks, and you can make 2 and a half $1,000,000 each. It's when that happened. That it was it was not an easy decision to say no to that possibility. At the but at the same time, you know, we had our friends telling us, like, this is like they'd never seen anything like this before. This was post bubble crashing though. So, because we actually didn't think that this was going to make us money at that point in time, but what we did think it would do was give us instant street cred. Right. Before before we ran hot or not, we had started a comp another company with, the 2 of us and then 2 of our other friends. And and with that previous idea, we had gotten a buyout offer for about 5 or $6,000,000 for the 4 of us, but we had to stay for 4 years. And we had made the decision to turn that one down because no one wanted to basically sell our youth out for too cheap, because we felt like we had the capability to do more. What did that company do? Decision before, so it was easier to say no this time because it was maybe doubling of that, but we still felt like you can't buy your youth back. And, you know, we're like, well, we're in our twenties. We'll never have this again. We have to do more. But it was a it was a tough decision, I have to say. What did that first company do? It was called Dealspring, originally called Viral Promotions. It was a coupon platform for SMBs where you could create a coupon that would increase in value to the coupon holder if they pass it along to their friends. Oh, I like that. Yeah. So it was like because that the thinking was that Amazon would do all the big box type of products, but there would be a whole class of products like niche products, like, say, horse saddles or whatever that would not be, you know, kind of like drop ship type products, more niche products in. But those people tended to get business through word-of-mouth, so we wanted to create an accelerant for that. It's actually pretty interesting. I found the business plan for that, just when I was clearing my stuff out recently, and, we had terms in it like the social database. And, there are all these things that kind of allude to stuff that's happening now, but, we're just way too early. So hot or not, you you turn down the offer after, like, a week or so from AltaVista. You're you solved your hosting problem. And then, did you just kick back and say, this is like, we're just gonna ride this incredible ride? No. Not exactly. That 1st year was intense. It was pretty much a whole year of intense intense work. So after we solved the hosting problems, we still had we still had growth problems in terms of the code and getting it to scale and all that kind of stuff. But also because was the site loading slowly? Because was your database not optimized? Or That that I mean, just to give you an example, the second day we I remember on the second day of the site, it took about 30 seconds for a page view to to after someone voted on someone, it would take 20 to 30 seconds for the next page view. Would you get, like, scared that, oh my gosh. This is gonna give us such a bad reputation. People are gonna stop going, and we're gonna be out of business forever. We weren't even thinking at that point. It was, you know, like, it was more survival instincts kicking in. Like, we need to survive. It wasn't like, oh, if we if we fail, then we're gonna look dumb. It's more like, oh my god. We can't keep up. We have to you know, it was a challenge. It was like, this we can't let it die, which is a different mentality than I think, you know, it was more fear than greed. Right. Makes sense. And then on top of that, you know, we had other challenges too. Like, okay. We we bought ourselves some time. You know, Rackspace ended up saying they would host us for free for 6 months, and then they gave us a half off for the next 3 months and then a quarter off for the next 3 months after that. So we bought some time, but we realized that it had to generate some revenue somehow in order to pay for itself. And frankly, at that time we were thinking, hey, we need to have it make more money so we can hire 1 person to run it so we can go back to doing our real things. Because we really didn't see that it would become a business, at that point in time. So like I said, we were basically thinking more from a survival mentality than a than a greed mentality. So then what's the, other than the affiliate fee with Ofoto, when did you essentially launch the dating service, which I guess was the bulk of your revenues? Yeah. So the dating service launched about, I think a couple months in. It was free at that point in time, and then we added payments a month after that. So I think 3 I guess so 3 months after that, we had launched, what we called meet me at hot or not. The the website used to say, am I hot tell me, am I and then say hot or not. And, the the interface of the dating site was meant to be as similar as possible to rating the rating side of things. But so it said meet me at hot or not. And the joke was that meet me at would actually could be read meet meet in that we were a virtual meet market. Very clever. But, yeah, the the idea was to train an interface that basically felt the same as rating 1 to 10. So we made it, just saying yes or no and kind of adopted a speed dating, thing. And, a month after we launched that, we added, we made it. So after you matched with someone, in order to write them, one of you had to be a paid member. That was effectively the equivalent of saying, you know, you click yes on a girl, she clicked yes back to you. That's kind of like walking into a girl and smiling at her and she smiles back at you. And then at that point in time someone has to buy drinks, you know, and it's and it's usually the guy. So it's it's totally like the Tinder model, you know, as you mentioned. Tinder is pretty much exactly how Hot or Not worked, except Tinder was free from the get go and, has remained free. But, well, actually, no. They're starting to charge for they're starting to charge for some premium functionalities, but, anyway, yes. It was basically Tinder of the web and and, you know, Tinder is now Tinder of mobile. Okay. So once you launched, charging, how quickly did that grow? When did you when did you start paying yourself out of the profits on Hot or Not? We didn't actually start paying ourselves for another 2 years or so, but, it's not entirely honest to say that though because we were the only people that owned it. We didn't raise any money and, when we turned on the payments, it instantly went to where we were each making, you know, like 100 or 200 grand a year. Well, anyway, that 1st year, I think we did around 7 or 800,000 in revenue. And it was all it was all profit because we had no cost structure at all. Right. Because we had done those deals. The the real cost was really the bandwidth at that in in those days. And so with the Yahoo deal not going away after that 1st year, the cost was not an issue. So it was pretty much, you know, I think our net margin was 90 90 to 95%. Unbelievable. It it was it's it's the end of that dream. It it was. We won a lottery ticket. We had a winning lottery ticket. But we paid ourselves, like, 40 or $50,000 a year, which was basically what I had made around the time coming out of college as an intern. We didn't touch the money that we were making because we weren't we just we're never sure if we're gonna need it, as a company. So we we didn't distribute it out. But it's a little disingenuous to say that we weren't making any money because we knew the money was there and it was ours. So but but actually from a mental discipline standpoint, not having it in our personal bank accounts probably did help keep us Were venture capitalists, like, dying? Were they calling you constantly? Like, we have to invest in this. We gotta scale up, blah blah blah. We were getting a lot of calls, but, to be honest, this was in, you know, this was in October 2000, which you remember those days. Sky was falling. We basically said any VC who wants to invest in this idea right now is an idiot, and we don't want him involved or her. So we actually only got contacted by male VCs. So, so actually, I'm not being sexist in saying, yeah, all of them, we didn't want him involved. And so no. Now in retrospect, maybe they weren't idiots, but, at the time we thought they were. Yeah. Because we we were very gloom and doom, sky is falling at the time. So And yet and yet your sky wasn't falling in the sense that you you were showing that the Internet does scale and you can have 90% margins with a product that people find useful. Yeah. You know, we were I guess one of the first examples of, even to ourselves of companies being able to be launched entirely bootstrapped on the web and reach some level of scale. Right? Within 2 months, we'd hit, Net Nielsen's top 25 advertising domains because we've had ads on there. And so, you know, here we were. I think we're right next to ESPN at that time. Wow. And, you know, we we didn't have any money. We were in debt. We and we didn't spend any money. And so it was pretty enlightening for us at that point to say, hey, you know, like, this is probably the future, you know, that people are going to be able to do this and that, actually that we actually called it that the power would shift towards the entrepreneur and away from capital. I'm just trying to figure out what makes this, viral. You tapped into this thing that happens in the brain every single day, and you kinda moved it online. And so people kind of automatically said, oh, yeah. That's how I think all day long every day, and now I can do it here on our real site and look at and, you know, and there's this voyeuristic aspect. Like, voyeurism always works. Like, people sign on Facebook to stalk everyone. Yeah. It's not I guess if you talk to any of my friends back then, it wasn't really a surprise to any of my friends that, that I was involved in this because, I was a big reality TV show, like, fan. I I remember back then we used to watch blind this show called blind date. Yeah. Dave Attell. Yeah. On Comedy Central. Right. And, like, Ricky Lake, you know, Jenny Jones, Springer, like, in in, Real World, Road Rules, all, like, all these shows, like, we were big fans of them. And so it was no surprise to our friends that we would be involved in, I guess, one of the first probably the first, I guess, what you could call reality, Internet type of things. Because the interesting thing about Hot or Not at the time from an intellectual standpoint was that it was kind of the first place where voyeurs and exhibitionists to some degree, you know, like, at that time, the only people who submitted photos onto the web were submitting them to Ofoto and Shutterfly and basically places where people were actually password protecting the photos. And so this notion of openly putting up all your most candid pictures, for scrutiny, was kind of new. I mean, blogs existed, but people were not really putting photos on blogs at the time and certainly not for other people to judge. It was kind of the first of of that wave and, so it was very interesting, I think, from a intellectual standpoint from what it was what it meant for the web in its next, in the next generation of things to come. And then so things are moving along. You're making money as a dating site. There even were I mean, how many people were meeting for dates and how many marriages were happening because of hot or not? So there are about half a 1000000 monthly active users in the dating service. We looked into it one time. We we I think there's about 5 to 10 marriages a day. A day? Yeah. Well, I mean, if you think about the scale, that actually is not that amazing. I mean Right. 5 to 10 a day is, like, 3000 people. You know, if you have 500,000 people, that's, you know, over time that that's not that that seems actually quite reasonable. Did you get, like, thank you letters and and Oh, yeah. I got invited to weddings and I mean, even I mean, even, I mean, some people, I guess, took longer to get married. Even, last year I got invited to a wedding. I actually spoke at Google, to the Google plus team a couple years ago, and someone on that team was like, hey. I met my wife or my fiance on your site, and, he invited me to his wedding as well. So I mean, even even, you know, now 15 years later, people are just getting married. So And and, you know, it sort of shows, like, how to not quickly pass by probably a lot of dating sites because the reality is people wanna know what you look like first. They don't care about all the details of the profile. That comes later. That was actually the idea. I mean, we actually did quite a bit of thinking in how the product would work and, we saw ourselves as being a router. So, like, we wanted to be the people router of the Internet is how we kinda saw ourselves. And so because we're a bunch of double e's. Right? And so once we kind of took that paradigm in to mind, we started thinking more about things like, you know, routing efficiency and, we're I mean, kind of a quite geeky way of looking at it, but, you know, in the marketplace, you need liquidity is more important than anything. If you have no if you have no liquidity, you have nothing. Right? And so from a marketplace standpoint, we said, well, you know, like you said, because, the most important thing to a relationship, at least as a first pass filter, is attractiveness, and attractiveness is subjective. It would be a more efficient router if if we got rid of that first, and then let them take it from there. Right? That's interesting. If you wanted a smart and attractive person let let's say you want the ideal you were you were searching for a beauty model who was also a PhD. Right? It's easier to go to MIT and then just look for the hot one real fast than it is to go to a beauty pageant and search out the one who has a PhD. Right. There are different modes in which you can attack the problem that create different levels of efficiency. And so, for us, we figured that the shotgun approach, initially as a first pass filter was probably the most efficient and also more fun. That's why Hot or Not was more efficient than Smart or Not in, retaining users. Absolutely. I had I had no users and shut it down almost instantly. My my 6 year old daughter actually came up to me and said, isn't this mean what you're doing, like, with the smart or not? So I I just shut it down. So you built up, and from what I was reading, you had about 5 and a half 1000000 in revenues or profits or or something, and then you sold for about 20,000,000 give or take. Well, I got it actually up to around over 7,000,000. I think it was a run rate of around 7.5 or some some 7 to 7a half 1000000. By that point in time, we had actually hired some employees. Like, we had, like, small crew of guys, because, my because my partner, Jim, at one point started riding motorcycles, and I was a little concerned about what would happen if we got an accident, to the business. And so, we agreed that we should hire people for redundancy, and, also for our laziness. And so, yeah. So we got it up to, doing about 6,000,000 in EBITDA. And then you're right. We did sell it in the twenties, which was rather low, but it was also we also did it when did we sell it? We sold it in February 08. So you for that time. It's kind of interesting. We were bookended by the 2000 crash and by the 2008 crash. We went from bust to bust. We went from bust to bust. And so in summer of 2007, you could start seeing the, housing market start to implode a little bit on the mortgages. We were a little concerned about that. And so I guess around November of 07, I went all to cash, like in my portfolio. And I guess we kind of took that to an extreme and said, we just need to liquidate and go to cash and that included hot or not. And so we ended up selling it, like I said, at, a pretty low multiple, but at the time we were like, we just have to go to cash. Well, you know, it's interesting because I remember reading about it practically the day you sold it, and some of the numbers were revealed. And it seemed to me like you were the only Internet company that sold on a multiple of earnings. Like Yeah. Well, yeah. Like, do you think if you held out a little bit or or, you know, hired a banker or shopped it around, you could have gotten more like a 100 or or more? Probably could have. But at to be honest with you, at that time, there there are a lot there are multiple things going on. I mean, that so that was one factor was the, we just need to get out. But actually, the bigger factor at the time was that I so what I didn't tell you is that along the way, we wanted to because we we had realized that people were going to be able to make more money that the the leverage was going to the entrepreneur, Jim and I wanted to start an incubator. Our first project was going to be a social network with some media sharing, capabilities on top. And the the guys that were going to join us were Steve Chen from YouTube and, Mike Solomon, who is YouTube's first engineer. It didn't end up working out because, we had someone on our board who was, not kinda didn't see eye to eye with us. You know? Like, we thought that this, in this new incubator model, the the employees should get 50 to 60% of the company. And, he had it more in mind of them getting 2, you know, because it's it's an older style of thinking back when capital was in power and not the entrepreneur. And so it didn't work out, but subsequently, we saw YouTube happen. And, like I said, we're friends with those guys. So to some degree, we saw Hot or Not as potentially being an opportunity cost issue. Now we didn't really see what was gonna happen on mobile at the time in terms of Tinder and, in that. So in in in many ways, we made a mistake on that, and that it was potentially a $1,000,000,000 play, but we had run it for 8 years and at and frankly, the other factor is that we're just tired of it. Well and also, it's never a mistake to take 10,000,000 plus off the table. Right. No. That that's true. Like, I'm not I'm not crying about it. Yes. I'm quite happy and and and feel lucky and blessed, I mean, that the entire thing even happened to me. So, no. Don't get me wrong. I'm not complaining about it. But, just speaking of it in retrospect from a financial standpoint, yeah, it probably could have made us more money had we held out, had we gone through more process, had we tried to convert it into Tinder or whatnot. But, you know, that's the way it goes, you know, like and you just move on to your next thing. So we're we're not really bothered by it. What if I'm listening and I I'm thinking to myself, man, I'm so jealous. I wanna do something like this. What what would you suggest to somebody who wanted to kind of come up with an idea that has the same sort of viralness? I mean, if you if you actually, if there was a formula, obviously, you would do it and everybody would do it. But what what would be some first tips? The the number one tip would be to just do it, for 1. I mean, so I think a lot of people have good ideas, but just never get off their duff to actually building it. And most things, many things start off quite simply. So it's not, you know, like even if you have a vision of this, complex product in the long run, start I would say start off with the simplest elements of it because at its core, most things that are interesting or edgy or or get passed around are not interesting because they're complicated. They're interesting because they're so simple. At its core, most products don't actually have to be that complex, when they're built out. So Like like, take Hot or Not as an example. What percentage would you say the initial Hot or Not was in terms of feature set from the final Hot or Not? Well, actually, we never changed the hot or not. Like, so we are actually pretty adamant about not changing the interface of hot or not because we felt like it worked and it was so simple that, like, you know, is it it was almost like anything that we would do to it would complicate it, and so we didn't so in the very beginning, the rating part, how it was in the beginning was pretty much how it was in the end. We did add the stating element to it, the meet me part. That part we kind of, it was actually almost felt like a separate site in that, like, there were 2 worlds. There was the the site where you would rate people and there was a site where you would meet people. And the only bridge was that sometimes when you're rating people, it would have a link on it that said click here to meet me if that person happened to be in both worlds. I see. So then it would move you kind of almost to the dating site. It was like it was almost like a parallel universe where, instead of just rating people, now this world was about meeting people. But everything else kind of the interface actually was almost exactly the same, and we tried to keep things, you know, we tried to keep things as simple as possible. And I found that in all my experience with all my investments and, with Hot or Not and other things I've done, that simple is always better. You know, like, the more you make people think, the worse it's gonna be. Also, if it's working, be very careful about fixing it. Because if it's not simpler or at least still very simple, then you have a very high likelihood of actually messing things up. And so you see that with a lot of sites, I mean, like, you know, you know, not only because things get harder, but also because people are used to something. People don't like change, and so you actually run the risk of alienating your user base by making changes, major changes without input and too quickly. Yeah. I agree with that. So many sites, I think, fall apart after their quote unquote redesign. Right. You know, and and some sites have done a better job of handling it by letting people switch back and forth or introducing it to people's optionally, you know, to give people time. Because I think I actually even if you had a good interface, people just don't, like, change a lot of the time, and, so you have to submit to them. So now you do quite a bit of angel investing. Based on your experience from Hot or Not, what do you look for in a good company that you would consider putting money into? The first thing that I care about is the founders and, whether or not I like them, whether I get along with them, like, whether I think they're smart. There's a class of person who thinks about everything at a meta level. So, like, when we when we were looking at hot or not, we were looking at it at a meta level from a system level to say, oh, not just from a user level standpoint, but from a system standpoint of saying, oh, you know, like, some people said, oh, why can't I, like, write comments on people? And we're like, well, that would create some mean comments, which would, which other users would see and would scare them off from submitting their picture. Right? And so there's a whole system view of things. Right? And, so I kinda look for people who have kind of a system level view of everything, including themselves. You know, why and and look, I read your stuff, James, and I think you're a great writer, and I know you're like that. You know, like, very introspective, like, why do I do this? Why do I behave this way? You know, being able to separate the intellectual observation from your own ego to say, oh, well, I do this because, you know, whatever. Kind of having that ability to look at users as, I don't know, to model them and to understand how they work and to understand human motivation, understand human psychology. I think those are very important things that some people have and some people don't. Think it can be developed actually. You know, funny thing is, with all my, my employees whenever they joined, I used to give them Cialdini's influence book. Oh, yeah. Great book. I made some of my employees read the game. Yeah. Neil Strauss. Artist. Yeah. Neil Strauss. In fact, actually, we used to make them go out and get numbers or something kinda like that. Because I actually feel like, these skills actually apply to product design a lot. You know, it's just understanding people and under being able to think about things at a, you know, in a kind of academic way is actually very important. You know, what Hot or Not did was you removed to some extent the gatekeeper on dating. So no longer did you have to go to a location to meet somebody of the opposite sex. This was, like, basically the the real big I mean, internet dating had been around for a while, but I think this was the beginning of the explosion of it. Right away, you see the person, you could decide if you meet them or not. And without any kind of, resistance or friction in the middle. Right. People router. Yes. Exactly. As efficient as possible. I used to go to bars back then, but I also used to hang out a lot on excite on their voice chat. You know, they have basically the chat rooms, which don't really exist anymore. Yeah. And it was fun, you know, like, you you got to meet a lot of people very quickly. And, so yeah. I mean, it it's definitely changing how we date. There's definitely more flow. No. You'll so I I noticed that you did, a a kind of a voter registration effort of vote or not. Yeah. Could you have used the hot or not idea for just simply voting for candidates? Like, given all the problems with voting, you know, ever since 2000, can't we just vote for candidates using a kind of Actually, there was a book about this. I'm trying to remember the name. But, you know, after the, 2004 elections, some academic wrote a paper, a book about about voting systems, and he actually talked about Hot or Not as being an example of a different system where, there are a lot of different ways you can vote for something, different structural systems, and, Hot or Not is definitely one of them. You know, the the the notion of crowdsourcing answers, that was actually one of the things that we were pretty proud about, and, you know, even though the topic seems so silly to to many people, even though Hot or Not as a concept was so silly, many of the smartest people you would ever meet were actually the most fascinated by it. Yeah. Because there's there's a data component to it. It's almost like how OkCupid, kind of analyzes the data of their people. We always talked about doing OkCupid type of stuff, and we just never hired a data analyst to to do that. So we did we did run some funny ones with, like, we proved that gay men were not hotter than straight men. And, I would not expect that. Yeah. We didn't expect it either. We were very surprised because the hypothesis was that they would definitely be hotter, but, they weren't. You know, we even actually, we were involved in a psychology paper that was actually published, with Dan Ariely. I don't know Dan from Predictably. Yeah. Dan Dan's been on my podcast. Oh, yeah. Perfect. So him and, and some other gentlemen, folks out there, the very first thing that we did when we built Hot or Not on when you submitted your photo, we asked you how hot you thought you were. And because we wanted to do the, you know, the we had we had read that, you know, smart people don't think they're smart and dumb people think they're smart. And so we wanted to kind of do the equivalent with with beauty. It was later pointed out to me that it's always that way for anything because you just have a reversing of the mean. You know, everyone is gonna, on average, be average, if everything if we have a normal curve. So, of course, the people who are hot don't think they're hot and the people who are hot. You know, anyway but What what surprised you about who got the most votes for for hot? Nothing. Nothing? Basically nothing. Like, basically, the people you expected to be hot got all nines. You know, like, you know, 6 pack on a guy, you can add a few points, you know, blonde, add add a point. There was nothing really, that revealing about who got the hot scores on average. I guess the most interesting thing to me, that I learned was more about the variance than the mean. Well, first of all, there's here's some interesting things. It was easier to rate women quickly, like people rated women quicker than they would rate men. I think that because we're trained by society to know what is good looking, you know, based on, with women, in particular more than for men. We did prove that looks were actually subjective at a micro level, like, many people did actually disagree on what was hot and what was not. You know, as an average, it was always a normal bell curve, but on some people you would have quite a variance, or even sometimes like bimodal, distributions. And who would get the most dates? Would it be people who everybody agreed on or people with the highest variance? Probably the people who are the most aggressive. You know, one time I shaved my head and I thought, oh, everyone's gonna be scared of me, no one's gonna wanna talk to me when I was going backpacking around the world at the time. And what I found was actually, I was right and I was wrong. A lot of people wouldn't talk to me, but the ones who liked guys who had no hair really came on strong. I guess it's just making the point that like more than anything differentiation is what matters. So it's almost like, filters matter. So it's almost like how copywriting works. There's there's no absolute, you know, the the problem is if if I'm if I have a bald head, I have to find the girls who like bald heads. It's not easy to find that, but with high liquidity, with high pass through, they'll find me. It's just a matter of differentiating yourself in some way, shape, or form. You know, it's basically peac**king. You have your peac**k and then you have to, like, get seen by girls. The more girls that see you, the more successful you'll be at meeting them. And then the more successful you are meeting them, the more likely you'll go out with them and then so on. Right? It's a funnel. And, Jim, your partner, he met did he meet his wife on Hot or Not? I don't think he met her on Hot or Not. He met her at our Hot or Not 5 year anniversary party. Okay. So yeah. Thanks to Hot or Not. How did you meet your wife? I met my wife, in Shanghai originally through friends of friends, and there she is actually. I actually have to run soon. I'm on baby duty now. Okay. Well, I will let you get to baby duty, but thank you so much, James. Is there anything, you're working on that you wanna give a shout out to? Or Yeah. Yes, sir. I mean, I have a I have a pet project right now I'm working on called Keiki, which is a, it's a YouTube viewer for kids that I've been building as a hobby for the last year. There is now a YouTube for kids app, that YouTube launch, but it's actually quite different. So anyway, if anyone has kids, give it a shot. C a k e y, I can get it in the Apple Store and the Google Store and all that? Yeah. Yeah. Alright. Well, James, thanks so much for spending the time, and it was a a great education. I was a big fan of Hot or Not, so I was it's glad to talk to you. Well, thanks. I'm I was glad to talk to you. I'm a big fan of your writing. So Thank you. Yeah. Talk to you soon. Okay. Take care. Bye. Bye bye. For more from James, check out the James Altucher Show on the Stansbury Radio Network at stansburyradio.com, and get yourself on the free insider's list today.