How I Built This with Guy Raz - Roblox: David Baszucki

Episode Date: August 15, 2022

In 2003, David Baszucki wanted to go viral. He had already sold a company that made educational software, and now he wanted to build something with mass appeal; with build-your-own avatars and myriad opportunities for users to compete and connect online. So in 2006, he and his co-founder Erik Cassel launched Roblox, a platform where you can play millions of different games, set in a wide array of virtual worlds. You can adopt a pet, escape from jail, build and run your own restaurant, or solve a murder mystery; you can even create games of your own. During the start of the pandemic in 2020, half of the kids in the US were keeping in touch via Roblox, and today, the company is worth over 28 billion dollars. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca slash host. We had some people play it, but we knew within a week, oh my gosh, this is not going to go viral. We have a lot more work to do. And Eric and I had to say, okay, we've got another nine months where we're going to have to buckle down. I mean, at times, this has been the hardest thing I could ever imagine. There's been times when we've all thought, oh my gosh, this is the hardest thing we've ever done. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how David Bazuki pivoted from making physics software into creating Roblox, a virtual gaming platform with more than 200 million monthly users.

A few months ago, I was going through emails on my laptop. A nosy 11-year-old, also my youngest son, was looking over my shoulder when he shrieked out, Daddy, you have an email from David Bazuki. How do you know who David Bazuki is, I asked? Daddy, he replied. Everyone knows David Bazuki. He's the founder of Roblox.

Needless to say, a few weeks later, when I interviewed David Bazuki, I had an in-studio guest by my side. Hi. How are you? Good. How are you? I'm David, and I'm in Roblox headquarters right now. Okay, it turns out lots of kids know who David Bazuki is,

because he created a world that so many of them are part of. It's estimated that in the United States, three out of four children between nine and 12 years old play Roblox. I know, insane, right? I just wanted to ask, who is your favorite character out of them all? Like, Builder Man, Mr. Robot, who are the others?

Kenneth? Yeah, we've kind of taken this approach. It's almost as if I don't have a million children, but if I had a million children, I would love them all. Roblox is a platform where you can play millions of different children. games that are set in virtual worlds. Or you can create your own games. Now, if you've never seen it, the characters or avatars look a little like Lego figures running through an infinite number of worlds, many of which look like cities. In some games, for example, you have to escape

from jail or you can adopt a pet and even take care of it. And inside these worlds, you can spend and even earn money using a currency called Robux. To buy, Robux, you have to use real currency, dollars, euros, yen, whatever. And it's how David Bazuki's company has grown into a publicly traded company with a market cap of over $25 billion. Roblox was actually launched in 2006, and by 2016, about 10 to 15 million people were playing on the platform each month. But then came COVID, and millions of children had no way to play with their friends or interact, except on Roblox they could. And the company saw a massive spike in growth starting in March of 2020. Today, hundreds of brands like Nike, Gucci, and Chipotle have built out

worlds within Roblox where they even sell virtual products. And world famous artists like Lil Nas X have even held live concerts inside a Roblox virtual world. It's a taste of what the larger Metaverse may one day look like, a world that, like it or not, most of us will take part in in some way. But when David Bazuki first set out to start a business, he wasn't thinking about game playing for entertainment. His first company was in educational software, and more specifically, it was software for physics students. The concept wasn't scalable, so David and his business partner, Eric Castle, shifted their focus towards a different concept. one that would eventually morph into Roblox. David grew up in Chicago and in rural Minnesota.

He always loved math and science, and in particular, he loved building simple computer games. I built asteroid-type games, and there was a way to, in a primitive way, go to Radio Shack and buy these knob potentiometers and wire them up to the Apple 2 and build a primitive game controller. And I can remember having my siblings come down and play this cheesy Space Invader game I made, but have these knobby controllers. It really was inspirational to me. And how did you, I mean, this is obviously, there's no internet or Wikipedia. I mean, there were physical manuals that you could buy, like sort of trade publications, I guess. Is that how you learned how to write the language? Yeah.

This was a really early formative time. You would go down to your local PC. store. They would have a lot of plastic envelopes with what is the current cool programs of the day and then buy a bunch of magazines, buy the Apple II manuals and that collection of information, none of it online, was enough to figure it out. There were, in that time, there were magazines that would list a program and if you wanted to, you would read the magazine and type the whole program in to learn things as well. I was primarily trying to write an assembly language, but through all these manuals and stuff, I figured it out. Wow. So it's not surprising that you

decided to study computer science when you went to Stanford in the early 80s. What do that, what do that mean? I mean, presumably getting to Stanford, there were computer labs and it was probably a million times more sophisticated than what you had access to in Minnesota. Yeah, in the early 80s, this is when the early Fairchild and Texas instruments and all of these Intel-type companies were just getting going. And as part of the core electrical engineering curriculum at Stanford, there was actually a course on how a transistor works, the smallest component of these ICs at the time that were, you know, the early 6502 or Intel 8088 chip. At the time, you would go into a facility called Lotz at Stanford. These were all time-shared, very primitive black and white

terminals programming in Pascal, really very early in kind of how you would learn computer science. All right. So it sounds like you were committed to doing something around this emerging technology, right? I mean, you graduated in 1985. It's still, you still, you know, Not unusual, but less common, right, for people to have PCs in their homes, although it's starting out. And this is sort of the beginning of the PC Clone Wars. You get the compacts and the HPs and the other brands that are starting to emerge. And so people are starting to have them in their homes, but still pre-Windows, right? So it was still like DOS and you had that, of course, Apple Mac, which made things easier. But for people who had PCs, it was still complicated, right?

That's right. And big floppy disks. What was your thinking? What do you remember when you graduated thinking, all right, this is what I'm going to do? I remember thinking the Mac is cooler than the PC because it had that Windows operating system. And by 1985, the very earliest versions of the Mac were coming out with everything on floppy drive. And we can remember those times when using a Mac was listening to that drive, you know, Voo, Voo, all that kind of stuff.

Yeah. Also, though, I was kind of unsophisticated in how to find my career. And so I think I ended up having a couple jobs that were not super fun. All local? Local jobs. Yeah, local jobs. I spent the first three years after school. Really, you know, I can remember, and this is maybe career advice for a lot of people. When you're 22, 23, 24, 25, your career is not over if your first few jobs aren't that fun and exciting. Like, life is long and there's a lot of good things to learn. But, you know, I kind of spent that first two or three years saying, this isn't it. I'm still not doing what is super interesting to me. Do you remember what they were? I mean, were they engineering jobs?

They were both engineering jobs. One was at a company that made telephone equipment, and I was a digital line card designer and I was very frustrated that I was not getting to design as much as I want. I wanted to build stuff and I was getting very frustrated. Right, because when you're in your early 20s, you want to rush into things. It's natural. I remember feeling like I was in a hurry. And it's a natural feeling, yeah.

Absolutely. I felt, you know, I can remember calling my dad and in the second job just saying, oh my gosh, might like oh my gosh it's all terrible my career is over what am i going to do and i can remember it and my dad saying hey you're pretty young you got a lot ahead of you so just you know don't get so upset about all this so i guess around 1989 you you were probably 26 27 you decide to start your own business um a software company which we'll get into with your brother gregg You called it knowledge revolution, which is, I'm not judging you at all, but it's kind of a boring name. A little bit boring.

I'm not, no judgment, but what was it? What was the idea that you had? I was going to take two or three months off and decompress after my two difficult jobs. And we were right in the hardcore educational computing transition from Apple II to Macintosh. a lot of schools still had Apple twos. A lot of schools are starting to get Macs. And I immerse myself in the educational software market. Physics, math, history, played with everything.

And it's interesting when you immerse in something from the outside, it always looks shiny and mature. But as I got into it, I started looking at the physics software market. And at that time, the physics software market, and at that time, the physics software market, very awesome, a lot of stuff going on, but typically 10, 50 pre-made simulations to help animate and visualize classic physics things. I started going, oh my gosh, wouldn't this be cool if instead of these things being pre-canned, this is more like a physics construction set. And wouldn't it be cool if you could build all of these things from one simple system,

Students could do it. You could model textbook experiments. That was the genesis of the idea for this product called interactive physics and the company knowledge revolution. So this is in 1989 and I'm thinking, God, Ed Tech, I mean, this is like a nascent space. But I guess schools probably were, right? They were among the first to invest in computers and software because they had to prepare students for the future. I'm trying to remember what educational software was in 1989, 1990, because this is pre-CD-ROM. It's pretty primitive. Yeah. It was Oregon Trail. It was learning, typing. It was at a time when schools all around the world were putting in computer labs.

A lot of students didn't have them at home. It was kind of this genesis time, both for educational software and Apple as well. So you were, I mean, you were so young, 26, 27, but did you see, I mean, were you looking at this as like, this is a big opportunity, or were you looking at it like, you know, I know how to make software and I like physics and I think I can make something cool? I think it's the latter. It's kind of interesting. I can remember hanging out with various people and my dad and sharing this idea. I was very unsophisticated from a business or a market size. I just wanted to build this physics stuff.

I remember this pivotal meeting where one of my dad's friends said, okay, let's look at interactive physics. These are a number of schools, blah, blah, blah. I think the annual market for this is a million dollars a year. And that was kind of depressing to me because I thought the idea was so big and so creative. And I went forward regardless. What's interesting is maybe five or six years later, the market for interactive physics was about a million dollars a year.

So there's nothing. Yeah. But we had to do some fundamental work to get a physics simulator running on a Macintosh Plus. This is collision detection. This is Newtonian physics. This is all of that. If we wanted to fire a cannonball 500 yards away at a, a certain angle and velocity.

Any student would do that in interactive physics. They'd draw it. They'd track it. They'd watch it. And so the utility was really broad. But as we got that figured out, that interactive physics product, even though a small market really swept through the physics education market and got to the point where all the physics textbooks were linked to it.

They had a lot of example sets. It was being used very widely, really. And so the order started coming in. We would fulfill them. We had people that helped fulfill them. And we essentially cash flowed that business. And I guess you, you know, at this point, it was pretty much just you and Greg who were working on it. But then, from what I understand, there was a guy named Eric Castle who reached out to you and wound up joining your team.

And he was apparently a really good programmer, right, just out of college. That's right. But how did he find you guys? How did he know who you were? He saw us a knowledge revolution in all. There is a big community of Macintosh magazines. So Mac Plus Mac user. And we want a bunch of awards, best educational software, best teaching software.

So that's where he heard about us. Eric will feature prominently in the founding of Roblox, and we'll talk about that in a bit, but between you and Eric and your brother, Greg, what were you all doing? Was Eric focused on sort of the technology side, and did you kind of move away and focus more on the business side? Or was it your brother, or were you all doing all those things? Eric and I predominantly coding, Greg, predominantly marketing and selling. When it was time to go to all of these shows or work with the community, at that point, we would drive or fly and go to all of these conventions. I can remember one National Association of Science Teacher shows where we had a booth, there was an Apple booth, and it was really hard work. I think this is a four-day show where my brother and I ran both of those booths pretty much eight hours a day for four days. But that's kind of how we got the word out, demoing live to people. But this was, I mean, you were going after a very, very specific slice of people, like a tribe of people, physics teachers.

That's right. And so I guess I read at a certain point, you sort of realized that if you wanted to grow that, business, you would have to pivot, right? And I guess that pivot was you sort of built a 3D computer-assisted design product for like engineers, mechanical engineers, people who wanted to see how something's going to work before it's built. That's right. And we entered a whole new market, a whole new type of customer, Kodak, Xerox, Ford, people making mechanical things. where our product, which was called Working Model, which I love that name, it really described what we were trying to do.

Way back then when this wasn't widely available, you could simulate how that elliptical trainer would work. You could simulate the car suspension. You could simulate the camera shutter mechanism. And so we built a pretty substantial business around that. We were partners with all of the 3D design software at the time. And that's how we ultimately built knowledge revolution to the point where it was acquired by another company. All right.

So 10 years, a little less than 10 years after you founded it, the company was acquired. By the way, at its peak, how many employees did you have? We were in downtown San Mateo. At our peak, we probably had 40 employees. And we were, I think we were doing $6 million a year when we were acquired. And did you ever hit profitability? We were profitable the whole time because we were bootstrapping the company as we went. All right.

So acquired by another company reportedly for about $20 million in 1998. So great outcome for everyone. And in this company that acquired you is called MSC software. So presumably under that deal, you went to go work for them for some time. Yes, I went to work for them for two years. And could you have, I mean, at that point, were you, did you feel like you could retire? I mean, were you, I don't, I mean, were you at that point financially sort of independent? I think I was right on the edge.

And I think, you know, if we were conservative and managed our money properly, I think we for sure could have. and so I was for a while thinking maybe I will be retired but at the same time I think as I kind of after that was sold and after the two years I'm working there I went into a two-year sabbatical mode which more over time more and more got me itchy to do something else And I guess I should mention that at this point you were married. In fact, I think you also had kids, right? You had, because you had kids in pretty close succession, right?

You had like three kids all under the age of four at that point, right? Yeah. After I left MSC software and started thinking what we were going to do, we rented a motorhome for three months and went on around the USA trip for three months with those three little kids. It was an awesome break. After all of that stuff, really well remembered. And then came back and did a few other things, but I started getting itchy about a year into this.

Right. Okay. So you knew that really ultimately, you had to start something again. That's right. That was what you kind of landed on. And when you kind of came to that conclusion, had you already been talking to Eric Castle and, and your brother Greg or others who had worked with you at Knowledge Revolution about what you could do? Like did you start to like call people up and say, hey, let's get the band back together. Do you remember what you were doing? Yeah, there was an early experimentation phase where I had a rough idea of what I was interested in. I was interested in the idea of a simulation on top of which people could build puzzles or scenarios.

and the idea of unlike a knowledge revolution where we had to be really accurate in what we built because people were designing stuff, I was very interested in the notion could we make something that's very scalable so it can do a lot of things but not be perfectly accurate. And I started down the root of making this simulator more as a puzzle experience rather than an immersive avatar type experience. and that's where Eric joined me and we started working on this together. All right, so let's go back to 2004, because this is really the early outlines of what would become Roblox. But, you know, at the time I'm thinking there were some, I mean, this is still, you know, early Internet, and most people had dial-up. And there were things like, I think, like Second Life and Sim City, right? Those were already out there at the time.

That's right. They had all to some extent built these systems that would, you know, bring people together in immersive 3D environments. Well, we were in the midst of the very early phases of what we were doing, which was more this super scalable physics puzzle system. We had some people play it, but we knew within a week, oh my gosh, this is not going to go viral. we have a lot more work to do. And Eric and I had to say, okay, we've got another nine months or 10 months where we're going to have to buckle down,

really make this multiplayer, avatar-based, you know, co-reality if we want to get that virality, which is really our vision all along. It was just almost a realization. There were no shortcuts to doing that. So we shut that puzzle down and went back to work again

for another, nine months. When we come back in just a moment, how David and Eric create the virtual world of their dreams, but how it doesn't take off until they add one irresistible feature, virtual money. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2003, and David realizes he's working on an idea that has no legs. People are not. not going to flock to a site where they just get to solve a bunch of puzzles. So he and Eric spend about a year working on something much more interactive,

with multiple players and avatars and cool spaces to hang out. And they start with a name Dinoblocks, but eventually call it Roblox. When you sign up, you're going to join one specific place where there may be six to 20 people rolling around, bumping into each other in a place called Crossroads, which was our very first 3D place. And what did that look like? It was like a street or a town? Yeah, it was imagine maybe a space the size of two football fields side by side. And then in each of the four quadrants, imagine in one there was a castle, in one there was a little area where you could put things together. In one, there was a little cave that you could go into.

And that was the very first version of Roblox that started this virality. So the idea was you'd log in and then you'd have a character, maybe, and then you would see other characters moving on, which were actually connected to real humans through the Internet somewhere else. And you could, and initially it was not, it was just like, you could talk to them and chat with them, but really it was still about building structures. It was really about hanging out with people, chatting with people.

The fun of feeling as if we're in a physical environment. So, oh, let's go over here and stack some blocks up and see what we can build. Ooh, let's put a fun little time bomb over here and watch this thing fall down on us. But it was actually really social. and Eric and I and then soon John and then soon Matt and then Keith, we'd spend a lot of time hanging out, meeting these people and chatting with them. And in those early days, we probably knew half of the two or three hundred people on Roblox. And we were in there every day chatting with them.

What would you like to see? What can we make better? So it's interesting to me because you were, I mean, you were committed to creating like physics. this sort of physics software and then these kind of puzzles and games. So clearly there was this kind of educational component to what you sort of were passionate about. But it seems like early on you were kind of moving in a different direction saying, you know, actually let's just make a place where people can hang out. That's right. We carried the theme of the physics forward in that we wanted the world where people would hang out as much as possible to be like the real world.

because then interesting cool things would happen. If a building was leaning over and we pulled out one of the supports, the building would fall down or the early cars on Roblox. Those were really had axles and motors. So if we pulled a wheel off the car, it would scrape along on the ground. That Simulate the Real World became this foundation on top of which we said, okay, now let's get more social avatar hangout. on top of that foundation.

So I'm curious. I mean, in that first kind of year, year and a half, it was just you and Eric kind of designing this, coding it. By the way, did either of you have a background in like design? Because you were creating a world with graphics and

characters and... We didn't. There were a lot of people we met in those days that is too primitive, too crude, not going to be fun. Games have to be this. and that we really gently ignored respectfully. There was also a notion that function and making this work so well is so important to us that we're comfortable leaning in on programmer art to the point that the blocky Roblox

avatar that is now just one of many, many avatar shapes. If you analyze it is actually very well. one by two by one on the arms. The torso is two by two by one thick. The legs are one by one by one. So that classic Roblox avatar is really just an extension of us putting some simple blocks together to get that going. I know this might be a very sensitive question,

but I've checked and you've never been sued by Lego, but I know that people must have said, hey, they kind of look like Lego characters. Yeah, I think in the early days, we stayed away from the exact Lego form factor. We just said, let's go simple one by two by one. But there was for sure some sensitivity when using, for example, yellow in the avatars, which is this classic Lego look.

They were very gracious with us, though. And I think we were able to work out, okay, yeah, we'll make the defaults this way. We'll try to remove any confusion whatsoever that this has anything to do Lego. Here's what I'm wondering about too, which is you were already in your early 40s and I think Eric was not too far behind. And when I think of like video game developers, I think of younger people. I think of people in their 20s and 30s. Not and I'm trying to be careful to say this because there's nothing wrong with being in your 40s. But were any any of your friends or colleagues or people you knew, you know, from Stanford.

Was anyone like, you're doing what? You're making cartoons? It's interesting. I think you're doing what thing maybe lasted for 15 years because I think because Roblox has always been under the radar a bit and been used by younger people. It hasn't really surfaced into pop culture, you know, maybe in the last two to three years. Yeah. So I do think a lot of friends thought that.

I actually thought in a beneficial way my kids might have thought that as well up until the last two or three years. Or it's, oh, yeah, dad's working on this video game thing. What I think it gave us was the notion that we're really building platform and system and technology. We're really not building the game. And it gave us a little bit of the humility that we very early on knew that this has to be about the creators on the platform not us. We want them to be famous, not us. And so I think that that mirrored more to Eric and my specialty, which is let's just build great technology. Right. So as you were kind of testing this out, right, and as it became clear that it was going to be this kind of social platform

with avatars where you could, you know, buildings would collapse if you pulled out a brick or you could build things. I mean, did you see it as an educational tool? Did you see it as something that, I mean, did you see it as something that could be, you know, turned into a tool like that? How were you thinking? Did you see it as a game, a video game, a massive online, you know, multiplayer game? Even early on, there was a bit of a thesis that if we could mirror and really couple raw 3D cloud base. We used to call it digital stuff, simulated stuff in the cloud, that this is such a fundamental technology

that on top of it, people would play. Someday they'd go to school or do simulations. They might work together. It was the notion that this was going to be a universal type technology. That happened really early on. And then we released Roblox Studio. And the second we released Roblox Studio, it was one of those days where you go, oh my gosh, this is going to be absolutely amazing. We cannot believe in a couple days, this early community at that time of 500 or 1,000 people have all downloaded Roblox Studio.

And we're seeing creations better than anything we can do. It's just such a fun experience. When you think that that's going to happen and then you see it actually. happen. Because Roblox Studio basically allowed users to create their own games and sort of experiences on the platform. That's right. And I think you, this was in like 2006 when you, when you launch that. But, and you know, as you say, you attracted users to think within five or six months. You had about 15,000 users, which is pretty good, probably not enough yet to, you know, hang up your cleats, so to speak, but pretty good. You're sort of getting some adoption. Did you start to

notice early on that most of the people who were using it were kids? The early Roblox demographic was going viral amongst kids, and we reintroduced Roblox Studio. Within a month, we were all working on our very first safety civility system. We could see that everyone, you know, from a range, from 12 to 18 on the platform. So we did know that because we were hanging out with all of them. One of the things that I know about because I've got a children's media company that I'm a partner in and we make a kids podcast called Wow in the World, including other shows, is there's something called Kappa, which is a law that requires companies.

It's an online privacy act. You basically have to protect the privacy of kids who are, I think, under the age of 13. can't collect information about them. And you had to kind of become Kappa compliant right away. I guess was that in response to the fact that you were attracting so many young users? Or was it, did you know you were going to have to do that even before that happened? We knew very early on that to be Kappa compliant, we would have to under-optimized our advertising,

which is actually the first monetization thing we ever did. What Kappa means is part of it is you're not tracking kids. And in those days, the revenue you would make on advertising was much higher if you would use advertising sources that were tracking the user and doing all kinds of backend stuff. So very early on, we were crimping our revenue on that first advertising model. I mean, I wonder what your, I know you only went to raise money in 2009. It wasn't much. You raised a little over $2 million.

But before that time, in the sort of four or five years, before you even raised that amount of money, what were your biggest expenses? Presumably, you didn't have to spend money on developers because it was you and Eric, but you had office rent, but you had server space. I mean, how were you financing it? We financed by a range of an angel investors, friend and family did the first round. Friends of myself, friend of my brother, friend of my dad's. They got in at a really interesting time in the company relative to where we are right now. And that took us through to our first VC round with Altos Ventures a while later. but yeah we got pretty far on a small angel round so and and i mean am i right to about two million

dollars is that what you raised i don't remember exactly but i think we got very far with two million we then went on for a couple of vc rounds but ultimately the total amount of money that went into the company to get to the point of profit was about nine million dollars wow and everything we've raised since then is either cash and it's on our balance sheet, or it's been used for very early employees to offer some small amount of liquidity. But yeah, we got to where we are on $9 million. When were you and Eric able to hire some people? We were in an office in Menlo Park, and right around this time when Roblox Studio was going live, we hired our first two employees, John and Matt, and then I can remember

moving to Redwood City. We had 10 to 12 to 14 people. That went up to 16. Then we moved to downtown San Mateo. So from then on, it was, you know, build out the team. Right. So, I mean, let's talk about the business model at this point in 2006, 2007. How are you going to make money? What was the business model? We had to really figure that out. And we went through multiple iterations. We started putting just a few advertisements that were kid compliant on the Roblox home page, we did not feel good about that. We then moved to a club membership. It was called Builders Club, which was, you know, if you're in Builders Club,

you get some extra cool stuff, you get multiple places to build on. Yeah. But we quickly realized, well, not quickly, but over time, realized that wasn't going to scale. And then that led ultimately to our virtual economy, which is Robux and developer exchange and that engine that powers everything. But we did go through multiple iterations of trying to figure out what's really the system that's going to power Roblox as it grows. Right, because as you, you know, sort of began to think about this model that would eventually become your model, which was Robux, where basically people could buy this virtual currency,

Yeah. If someone were to ask you at the time, hey, you know, Dave, what can I do with these robocs? What can I buy with it? What would you have said? I would say that what you can buy is almost anything the creators on the platform can imagine. So, you know, work at a pizza place. You can go buy a cool scooter. If you go into bird simulator, you could say, hey, I want to be an eagle sooner than, you know, living my life as a sparrow.

in some experiences they would have their own coins that you could buy, clothing. It was really a full-on economy, and it is to this day, of whatever the creators in their experience can think of. So basically, it was from once the studio was created, it became a platform, like for people to kind of, I guess, for lack of a better word, to become their own entrepreneurs. I mean, they would, they could offer products for sale, a version of. products and and then the model would be that you guys would get a percentage, you get a cut of every sale. That's right. And the more flexibility we gave them, the more we were, just as with the content, we're

really creatively inspired by their inventions on how to monetize as well. And all of our creators are always balancing, they wanted bigger crowds on their platform. So if there's too much friction, that would slow down their growth. So they all figured out how to make immersive things that the vast majority of people use without spending any virtual currency. And even to this day, you know, it's only a small portion of the people on our platform who buy Robux every month. And we do quite well on that.

Even early on, the developers figured that out and have always balanced kind of growth and engagement with monetization. Right. I remember we interviewed the founders of riot games about a year ago or so on the show. And, you know, they did a similar model where you could buy things in League of Legends. And at that time in 2007, eight, I mean, was it hard, was it hard, like, was it hard to kind of make that argument to people like, hey, you can buy things in the game? I mean, were people at that time saying, but it's not real. It's not real stuff. What am I buying? I mean, was that, I would think that would have been the pushback.

We, there was a time in Roblox history where we were growing very rapidly on users and hours and all of that was good. But we had a really, it was kind of a difficult time where users were growing, but monetization was going the other direction. And we, we did maybe the first wave of our response is, did we break something? Did we need to tune something? What's a spreadsheet of the 50 little tune-ups that we can do? And those were not successful, and it was a little bit scary.

We knew in the back of our minds that, well, there's this really big system thing, and what that would mean is we take our virtual currency, the developers themselves can bring it into their experience in any, any way they want. We will then cash out those developers. And so we said, okay, all hands on deck, we're going to build this system not knowing whether it would work or not, but having a lot of intuition that it felt right and that we sure think it's going to work. And everyone we talk to think it's really cool. And then we had a day similar to when we launched Roblox Studio where we turned this on and within two or three days we had that same feeling just oh my gosh problem solved

so those are the big things that are hard to build that that power these types of systems when you i mean one of the one of the best things about uh about having kids uh you know as as as customers is that they talk to other kids about it right and they're at school or uh you know on sports teams or whatever, and they talk about things. And this is how, this is our toys get popular or Paw Patrol or like these huge kind of generational brands become huge because, or even brands that aren't generational, but just get huge for a year or two. It's because kids are playing with them, Bakugan, you name it, whatever it might be.

Is that what was happening? I mean, were you spending money on marketing at that point, on advertising? We had some interesting learnings along the way, and we received some really good advice from many people. That paid acquisition is a great way to test things, but there's a third way that some platforms grow, which is creative virality. And I think in the mid-2000s, this was all about, well, invite a friend or push this link here. Right. We tried some of that stuff and spent some engineering on it, but we quickly saw the raw virality from product quality was stronger than that.

So we had to develop that muscle really of viral growth. We've done experiments along the way with paid acquisition to maybe accelerate here or there, but by and large, everything on Roblox has been viral. It was kids talking to other kids. That's right. And teens talking to other teens. On the playground, Metcalf's Law, when the more people in the network, the more powerful the network, then we always wondered if that's, wow, there's a few people in the classroom.

They're chatting about it. Now they're going to invite more people. When we come back in just a moment, how Roblox continues to grow, but how the team is suddenly tested in a way that nobody could have predicted. Stay with us. I'm Guy Raz, and you're listening to How I Build. this. Hey, welcome back to how I built this. I'm Guy Raz. So it's early 2013 and Roblox has grown to about 7 million users a month. And as it gains popularity, it has to contend with the not so

pleasant behavior of some of those users. So before we go on, I'm just going to bring my son Bram back into the mix here for just a moment because he's a regular on Roblox. And David, Bram has a quick, another quick question for you. I just wanted to ask, well, not really ask, just say, I think in the games there should be like a monitor because there is so many people who say really weird stuff in the game. Yeah, it's kind of interesting because we have a lot of filters and you see the hashtags and all of those kind of things when we block those people. because we really try to keep this a safe and civil environment. But more and more that monitoring is getting really, really good and really, really automated. So it's something we're working on all the time.

Right now we just end up blocking a lot of words. Can I just piggyback on that for a sec, David? Because when you first started to do this kind of monitoring early on, it must have been more like a cat and mouse game, right? like people doing things that were not what you intended them to do. I mean, you put a bunch of kids in a room together, and eventually some of those kids are going to start beating the heck out of each other, you know? That's exactly right.

I remember when it was the four of us, we all ran the moderation system. So we were on the front lines acting as moderators. And as we went, we were constantly building in, you know, any image, that's ever uploaded, any sound that's ever uploaded needs to go by human moderators. The tension that for many creative developers who are very brilliant, very smart and very creative, it's actually fun to push on Roblox and see, oh my gosh, what can I get away with? And it's an area where we continue to go even further and get even better to this day, but it really started in that first month.

How did you and Eric work together? Was it, I mean, you know, your partner's in this, but, I mean, I'm assuming he had probably strong views and you had strong views and there were things that maybe you want to try or things that he would you, did you argue or was it, was it just easy? Some areas super easy and some of the core areas of even inside Roblox today, the way that way. we run the in-memory database, the way we do networking. These are still foundational things that Eric put together. Other areas we did disagree on, and one was that very first Roblox avatar, which became the Roblox blocky classic avatar. We had a lot of debate. Eric thought, oh my gosh, this is still too rough. We need better-looking avatars. But we came together with the notion. It's better to get this live and get it in users' hands as long as it's safe and robust and see what

the feedback is rather than spend another five or six months getting better avatars. That's something we always came together. And I think in general, we were very aligned on this initial architecture. We were probably whiteboarding an hour a day as we would go. So we were able to build things very quickly, you know, generally the alignment was really high. So the business is growing clearly in it, and you could see where it's headed. And meantime, Eric had been battling cancer and quite an aggressive cancer for a few years and unfortunately succumbed to it in early 2013. When that happened, I mean, he was the main.

main, right, I mean, he had sort of built the back end of this thing. Aside from, I'm sure, everybody being devastated, what did it mean for Roblocks? You know, he had a cancer that was basically not curable. He knew he had, you know, between one and three years, I think, at the time I forget exactly. It's just like, oh, my goodness. So what was interesting with Eric was in the midst of that, he took a few weeks off and with his family, but then didn't change anything. It was almost a testament to what we were doing together was his optimal lifestyle, which made me really open my eyes a bit. So Eric kept working for quite a while.

We all knew he was battling cancer. I tried to make it very easy. You know, hey, Eric, if you want to chill out, we got this. He's like, no, no, no. Like, I'm enjoying this. But it was a little scary. I'm very, you know, so thankful for Eric because he was almost a template for our values.

he really helped me in my understanding of what great technical talent looks like, just working so closely with him and seeing solving problems from a vision standpoint rather than a tactical standpoint was absolutely amazing. And in a way, there is also a motivation to me in that after Eric had passed, maybe in addition to other things that would motivate me. I had a huge motivation to want to make Roblox true to his vision almost, but it was very powerful. All right, so you've got this game, you've got a lot of users,

or you've got this world, this platform, a lot of users, and the pandemic hits. And you begin to see very rapidly this explosive growth, like triple digit growth, right? Were you anticipating that? I mean, did you, in March of 2020, when the world kind of shut down, the WHO declared a pandemic,

did you know that that was going to happen? No. No. It was really kind of a week or two in. We were so busy, okay, how are we going to work remotely? And then as we started settling into remote work, and things settled down.

I think it was April and we looked at our numbers and it was almost like, oh my gosh, this is a interesting byproduct of this pandemic. Look at these user numbers. We got to figure out how to scale and start making sure we have enough servers and all of that kind of stuff because this might go in a weird direction

that we weren't expecting. But all in all, I think we did really well during that last two years, probably, you know, I want to guess half the company has been hired in that last year or two, which is amazing. And as we're starting to come back to our office, it's great to meet all of these people. So as you, you know, you become this massive gathering place for kids at home, stuck at home during the pandemic, predictably, and I think predictably is right word,

What comes with that is more scrutiny, rightfully so, and also more challenges around some of the content that is being discovered. I think there's an assumption that many of us have that a company that has user-generated content can really control it. You can just build in algorithms or systems that can automatically eliminate it because, you know, you're smart people and you develop the system. And so you should be able to automatically eliminate content that's objectionable or offensive or scary or dangerous for kids. First of all, is that possible? I think that we're always balancing. You know, when a new creator comes on the platform and they're at a computer tech camp,

can they share that creation immediately with their friends? we're always balancing does the average person on Roblox ever run across any bad content? And so we're always balancing the kind of the control we put on that user-generated thing with yes, our ability to make sure there's virtually no bad content on the platform. So it is a balance. We have made the decision not to filter every single, Roblox creation through a day of moderation. And at the same time, we constantly get better through algorithmic, social, human review.

And right now where we're at is it's very, very, very infrequent that anyone on our platform runs into intentionally bad content. So I want to, I mean, this is sort of a question that you might think is weird or puzzling or, you know, or maybe not. But I'm, I don't think anyone listening to this show will be surprised to know that I'm not a gamer. I don't play games. And I don't watch a lot of stuff, right? And I think part of it is, I, well, not part of it is I need to be outside because I'm in the studio a lot, you know.

And there's a lot of, you know, there's a lot of talk around the metaverse that we're moving into this future where, that is how social interaction will be and that it will feel more and more real. And I've even seen you sort of quoted saying things like that. And I don't know, I read some of that stuff. And I'm not picking on you, but I read it. And I think, really? Is that really where we're headed and is that healthy for us? It doesn't seem like we were emerged from the savannas of Africa to live in a virtual world.

I just don't think it's where we're supposed to be headed. Yeah, I share your sentiments, and at the same time, I tend to be pretty optimistic. I'm optimistic that people over time will balance texting and phone and video and 3D as ways to connect. And I'm optimistic, you know, in schools, there'll be a balanced amount of reading about history or, you know, using immersive 3D technology to go to ancient history. And I'm kind of optimistic that the dystopian matrix in the VAT type, that's your world, is hopefully a long, long way off. And we'll see a really lovely, more balanced use of this technology

that we would use as a utility and society will come up with a good balance on. You took the company public in 2021. So now a publicly traded company you are on, you do quarterly earnings reports and your financials are open to scrutiny. The company, you know, one measure of valuing a company is a market cap. It's not the best, but right now it's about $22 billion. It's amazing, right? It's made several people very wealthy, including you. But you also have to contend with a stock price that sometimes is really high and is really low.

And as of this recording, it's close to its 52-week low. And I know it's just a stock price. But, you know, does that stress you out to get? I mean, you know, you are running a public company. And everybody says, no, I don't worry about the stock price, of course. But, I mean, how can you not worry about it when there are millions of shareholders out there? Doesn't it stress you out at all? It's this interesting mix where we have these shareholders.

We used to have our VCs, then our employees, and our angels. And now we have people all around the world. So we have this amazing responsibility for them. At the same time, I mean, it's pretty fun to run this company. We have $3 billion of cash in the bank. We generate cash. We have strong values and amazing people. And so we keep coming back to for our shareholders, we have to keep having this vision of the future.

And just as we did five years and ten years ago, have those five or six or seven really hard platform, strategic things that we've got this funny feeling that if we do this, they're going to amplify and multiply in multiple ways. And that's just really fun. Dave, when you think about where you are, where you start and where you are, I mean, you know, you, we're going to do okay. You were a really good engineering student. You were into programming really early and went to Stanford and we're in the Silicon Valley area sort of before the kind of the internet explosion. So you were at the right place at the right time. And you were probably going to, I mean, I would have bet on you when you were 18. I would have been like, yeah, he's going to do. I appreciate that. fine but but but i wonder how much of what did happen you know 23 billion dollar company and you know maybe even more uh in the future how much of of that do you attribute to just how hard you worked and and you know your skill and intelligence and how much do you think has to do with luck yeah i think there was some luck in having the capability both financially and where i was to be able to go with my intuition. I think, you know, my, my intuition pulled me towards interactive physics.

And when we were running knowledge revolution, we would always chat about what's the next thing. So I'm pretty fortunate in having that time to take that time off and to start hacking around. And then I would say at the same time, I mean, at times, this has been the hardest thing I could ever imagine. This is, there's been times when we've all thought, oh my gosh, this is the hardest thing we've ever done. This is really difficult. So it's been a balance. We've seen both sides of that, really. That's David Bazuki, founder and CEO of Roblox. David, thanks so much for your time. Hey, thank you for just such a thoughtful, wonderful framing of the questions. It's been,

it's time has flown right by and I've really enjoyed being with you. Bram, do you have any last question for David before we go? Um, if somebody told you, like, 25 years ago that DinaBlocks would turn into, like, one of the biggest games in the world? Oh, my gosh. When we started Roblox, we, we had both a really big vision of what we were going to try to build, but we never had such an imagination. never thought that when we started. Hey, thanks so much for listening to the show this week. This episode was produced by Carrie Thompson with music composed by Routin Arablui. It was edited by Neva Grant with research help from Margaret Serino.

Our production staff also includes J.C. Howard, Casey Herman, Liz Metzker, Alex Chung, Josh Lash, Sam Paulson, Catherine Seifer, Elaine Coates, John Isabella, Chris Messini, and Carla Estabez. I'm Guy Raz and you've been listening to How I Built This.