How Mark Cuban made first $1 billion | Lex Fridman Podcast Clips

how did you make your first billion so my partner Todd Wagner and I um would get together for lunches and we were at California Pizza Kitchen in Preston Hollow in Dallas and he was talking about um how we could use this new thing called the internet this is late 94 early 95 to be able to listen to Indiana University basketball games because that that's where we went to school mhm and he was like look when we would listen to games we would have somebody in Bloomington Indiana have a speaker phone next to a radio and then we would have a speaker phone in Dallas and you know sixpack or 12-pack of beer and we sit around listening to the game because there was no other way to listen to it so I was like okay my first company micro Solutions you know I'd written software done Network integration and so I was comfortable digging into it and so I'm like okay let's give it a try so we started this company called audionet and and effectively became the first streaming content company on the internet and it we were like okay we're not sure how we're going to make this work but we were able to make it work we started going to radio stations and TV stations and you know music labels and everything and um evolved aet.com which was only audio at the beginning to broadcast.com in 1998 which was audio and video and became the largest multimedia site on the internet took it public on in July of 1998 it had the largest first day jump in the history of the stock market at the time and then a year later we sold it to Yahoo for $5.7 billion in Yahoo stock and I owned you know right around 30% of the company give or take and so after taxes that's what got me there well there's a lot of questions there so the technical challenge of that you making it sound easy but uh you wrote code but still in the days of the internet how do you figure out how to create this kind of uh product of of of just audio at first and then video at first a lot of iterations right like you talked about um we started in the second bedroom of my house set up a server I got an ISDN line which was 128k line and set up downloaded Netscape server and then started using different file formats that were Progressive loading and allowing people to connect to the server and do a progressive download so that the audio you can listen to the audio while it was downloading onto your PC yeah was it super choppy so you were trying to figure oh yeah for sure for sure it would buffer it was yeah was it it wasn't good but it was a start but it was good enough cuz it's the first kind of yeah because there was no other competition right there was nobody else doing it and so it was like okay I can get access to this this or this and then there were some third- party software companies zing and um Progressive networks and others that were that took it a little bit further so we partnered with them and and I started going to local radio stations where literally we would set up a server right next to it I had a $49 um radio the highest FM radio that I could find and we take the output of the audio signal from the radio with these two analog cables plug it into the server encode it and make it available from aet.com then I would go on yunet bulletin boards I would go on Compu serve I would go on Prodigy I would go on AOL I'd go wherever I could find bodies and I'd say okay we've got this radio station klif in Dallas that's got Dallas Sports and Dallas um news and politics and if you're in an office or you're outside of Dallas connect to aet.com and now you can listen to these things on demand and that's how we started and it started with one one radio station and then it was five then it was 10 then it was video content then it um the laws were different then so we could um literally go out and buy CDs and host them and just let people listen to whatever music and we went from you know 10 users a day to 100 to a thousand to hundreds of thousands to a million over those next four years how did you find the users is it Word of Mouth Word of Mouth just Word of Mouth didn't spend a penny on Advertising so the thing you were focusing on is getting the radio stations and all or radio and TV anything any content at all you pick up the phone what' you how' you I would I wherever I could like everything that was public domain I'd go out and buy a video or a cassette whatever it was you know um and this was before the the DM the digital minim Copyright Act of 9 whenever it kicked in so literally anything that was audio we would put online so people could listen to it yeah and if you think about somebody at work they didn't have a radio most likely and if you did you couldn't get reception definitely didn't have a TV but you had a PC and you had bandwidth available to you and the companies weren't up on firewalls or anything at that point in time so our in office list you know during the day what just exploded because whoever was sitting next to you what are you listening to right and that was the start of it and then you know in early 98 um we started adding video and just other things and we had end up with thousands of servers you know there was no cloud back then um and just pulling together all those pieces to make it work but where we really made our money was by taking that Network that we had built and then going to corporations and saying look you know n it's 1996 97 998 and to communicate with your worldwide employees what they would do is they would go to an auditorium that had a satellite uplink and then they would have people go to like theaters or ballrooms um and hotels that had satellite down Lings and then would broadcast you know the product introductions whatever and so we said to them look you're paying millions of dollars to reach all your employees when you can do it um pay us a half a million dollars and we'll do it just on their PCS at work so we did you know when Intel announced the P90 PC we you know charged them 2 million dollars or whatever to do that when Motorola announced a new phone or a new product we would charge them and so we used the consumer side to do a proof of concept for the network um and then we would take that knowledge and go to corporations and that's how we made our revenue and there's some selling there with the corporations yeah a lot of selling there but we were saving them so much money and they were technology companies they wanted to be perceived as being Leading Edge and so it was win-win uh how much technical Savvy was required you said a bunch of servers like at which point do you get more Engineers how much did you understand could do yourself and then also once you can't do it all yourself how much technical Savvy is required to understand enough to hire the right people to keep building this and Innova I did all the technology and then we hired engineer after engineer after engineer to implement it and so wow okay um from putting together a multicast network to um software to just all these different things was this like a scary thing like it's terrifying right because as we were growing trying to keep up with the scale and literally we're buying off-the-shelf PCS and then you know server cars as the technology advanced and hard drives and things would fail and we would have to you know we didn't have machine learning back then to do an analysis of you know how to distribute server you know resources so you know like there was there was a time when um Bill Clinton and all the Monica Lewinsky stuff happened they released the audio of um their interviews of him or something like that right and we literally we I knew at that point in time when that was released everybody at work was going to want to listen to it right so we had to take down servers that were doing Chicago Cubs baseball right you know and just make all these on the-fly decisions because there was no we didn't have the tools to analyze or predict be predictive but yeah it was it was all technology driven and marketing um the acquisition by Yahoo can you tell the story of that but also in the broader context of this internet bubble this is a fascinating part of human history yeah so on the acquisition side we were the largest media site on the internet it wasn't close there was nobody close we were YouTube and relatively speaking we would be 10x YouTube relative to the competition because there was nobody there um and so it became obvious to Yahoo AOL and others that they needed a multimedia component and we had the infrastructure sales all that stuff um and so Yahoo when we went public in 98 or right before I think it was they made an investment of like $2 million which gave us a connection to them and then after we went public they decided they needed to have multimedia and so in April of 99 we made a deal and then July of 2000 is when it closed and uh can you explain to me the trickiness of what you did after that oh the um the collar yeah okay so when we sold to Yahoo we sold for $5.7 billion in stock not cash and so I looked at I you know after micro Solutions um when I sold that um I took that money and initially I I told my broker I wanted to invest like a 60-year-old man because I wanted to protect it um but then he started asking me all kinds of questions about all these technologies that I understood like networks I had installed we had become one of the top 20 let's say um systems integrators in the country at one point in time we're the largest IBM token ring um installer in the country it was crazy right Bion blast from the past I mean so anyway so these Wall Street Bankers um or analyst rather um that were the big analysts of the time would call me up because they would ask my broker what does he know about this product this and I knew them all what was working and not working right and so the ones that work you know I say it's working I'd see the stock theyd say something the stock would go up 20 bucks right so I'm like well and my broker was like you need to you know this better than they do you need to invest so I started buying and selling stocks and this was in 1990 and was just killing it I was making 8090 100% a year um over those next four years to the point where guy came in and asked to use my trading history to start a hedge fund which we did and I sold within nine months it was great right but the point being as it goes forward so when um we sold to Yahoo I already had a lot of experience trading stocks and I had seen different bubbles come and go the bubble for PC manufacturers a bubble for networking manufacturers they went up up up up up and then they came straight down after the or somebody just um Lea frogged and so when we sold to Yahoo um I was like I've got a be next to my name that's all I need or all I want I don't want to be greedy and I'd seen this story before where stocks get really frothy and go straight down and I knew that because all of what I had was in stock I needed to find a way to collor it and protect it so understanding stocks and trading and options and all that my broker and I we went and shorted an indexed had Yahoo in it and so the law at the time was you couldn't short any indexes that had more than 5% of that stock in it right that of anyone of the Yahoo stock and so um I took pretty much 20 some million dollars everything I had at the time and I sorted the index this is fascinating by the way CU it's based on your estimation that this is a bubble or just mind not what you be to be greedy sure so you the foundation of this kind of thinking is uh you don't want to be greedy yeah I mean how much money do I need right you know where other people were saying oh I think you can go up higher higher higher I was like I went on CNBC and um I told them what I had done and they were like in Yahoo stock had gone up significantly from the time I had had collared and one of the guy Joe kernin was on there don't you feel stupid now that yaho stock has gotten up um you know x% more I'm like yeah I feel real stupid sitting on my jet but so you I mean there is some fundamental way in which bubble are based on this greed greed yeah and I'd seen it before right like I just said and so what I did was we put together a caller where I sold calls and bought puts and as it turned out when the market just cratered I was protected and you know over the next two three years whatever it was it it converted to cash paid my taxes Etc but um it protected me and as it turns out it was called one of the top 10 trades of all time and what was even more interesting out of that period um my broker at that time was at Goldman Sachs and I had asked him to see if there was a way to trade Vic the vix right the volatility index and there there wasn't right and so one of the the people that Goldman that we were working with to try to create this actually left Goldman and created indexes that allowed you to to trade the vix it's not trivial to understand that's that's a bubble I mean you're kind of lessening your insight into all this by saying you just didn't didn't want to be greedy but you still have to see that it's a bubble yeah I mean yeah obviously if I thought it was going to keep on going up and it was there was intrinsic value there I would have stayed in it but it it wasn't so much Yahoo it was just the entire industry you would back then you know like we're looking at the the magic 7 or whatever it is stocks now and people were asking is it in a bubble and when I would get into cabs and people just start talking about internet stocks there were people creating companies with just a website and going public you know that's a bubble right where there's no intrinsic value at all and people aren't even trying to make operating cap profits they're just trying to Leverage The frothiness of the stock market that's a bubble you don't see that right now there's not companies you don't see hardly you don't see any IPOs right now for that matter so you know I don't think we're in a bubble now but back then yes I thought we were in a bubble but that wasn't really the motivating factor do you think it's possible we're in a bit of an AI bubble right now no because we're not seeing funky AI companies just go public if all of a sudden we see a rush of companies who are skin on other people's models or or just creating models to create models that are going public then yeah that's probably the start of a bubble um but that said my my 14-year-old was bragging about buying Nvidia you know with me in in his Robinhood account he tells me the order I place it and he was like oh yeah it's going up up up you know and I'm like yeah we're not quite there yet but that's you know that's one thing to pay attention yeah we're flirting with it yeah uh you said that becoming a billionaire requires luck yeah can you explain yeah I mean there's no business plan where you can just start it and say yeah I'm definitely going to be a billionaire you can you know if I had to start all over could I start a company that made me a millionaire yeah because I know how to sell and I know technology and I've learned enough over the years to do that um could I make 10 million probably 100 million I hope so um but a billion just something good has got to happen you know um timing timing you know Internet stock market was going nuts right when we started you know and that certainly I couldn't predict or control um you know it's like AI right now ai's been around a long long long long time and the Nvidia processors or gpus rather you couldn't predict that now's the time that they were going to be get to that cost Effectiveness where you know you could do you could create models and train them and although it's expensive it's still doable you know we didn't really even we had as6 right for custom applications and we had CPUs that were leading the way but gpus were more for gaming and then crypto Mining and now all then all of a sudden they were the foundation for AI models so I think luck being essential to becoming a billionaire is a beautiful way to see life in general first of all I personally think that everything good that's ever happened to me is because of luck I think that that's just a good way of being it's like uh you're grateful that said there's some examples of people that you're like they seem to have done a lot of they seem to have gotten lucky a lot you know we mentioned Jeff Bezos it seems like he did a lot of really interesting powerful decisions for many years with Amazon to make it successful but he was really able to raise money right a lot of money and people were really dismissive of him because they weren't um making they weren't profitable and we we were in an environment where it was possible to raise possible to raise that money I mean what about somebody you get sometimes uh feisty with on the internet Elon but we couldn't even look at Zuck and Bill Gates and Warren Buffett look Zuck was just trying to get laid right and it took off and you wrote some good St AR we all is some level Foundation of human civilization right but um yeah so more power to him right you can't take anything away from him but yeah Snapchat same thing took off apps didn't take off in 2007 when the iPhone came out apps took off in 2011 2012 and if you were there with the right app at the right time and even Facebook um you know in 2004 the bubble had burst and you know the price for computers had fallen enough in kids in school all needed computers or laptops if he had tried to do something like that you know five years earlier I mean it was too young but you know five years earlier or five years later you know or frster might have been the ultimate or Myspace frster I remember frster or Myspace I had a MySpace account and that was before Facebook yeah the timing is important but there's like the details of how the product is built the fundamentals of the product like what well so but that's what gets you when the opportunity is there right that's what allows you to take advantage of that opportunity and and the Kismet of it all right you've got to be because it wasn't like any of the people I mentioned there weren't others trying the same thing yeah right you had to be able to see it you had to be able to visualize it and put together a plan of some sort or at least have a a path and then you had to execute on it and do all those things at the same time and have the money available to you because it wasn't like whether it was Google or Facebook you know they raised a shitload of money it wasn't bootstrapping it that got them there and raising money is not just about sales it's about the the general feeling of the people with money at that time in proximity if oh yeah duck wasn't at Harvard and he was at Miami of Ohio University or he was at Richland Community College same idea same person same execution and nothing I believe in the power of individuals to find their to realize their potential no matter where they come from but I agree I agree 100% with that right luck is required yeah I mean scale is the only Delta is scale yeah right we you know we're not all blessed with the access to the tools that you need to to hit that grand slam but then also billion is not the only measure of success right absolutely not right there's a everybody defines the success in their own way

Channel: Lex Clips

Views: 25,074

Keywords: ai, ai clips, ai podcast, ai podcast clips, artificial intelligence, artificial intelligence podcast, computer science, consciousness, deep learning, einstein, elon musk, engineering, friedman, joe rogan, lex ai, lex clips, lex fridman, lex fridman podcast, lex friedman, lex mit, lex podcast, machine learning, mark cuban, math, math podcast, mathematics, mit ai, philosophy, physics, physics podcast, science, tech, tech podcast, technology, turing

Id: Xh9HXlT1Y9g

Length: 19min 58sec (1198 seconds)

Published: Thu Apr 04 2024