David Baszucki, Roblox

27:50And that's super critical. But so, yeah, and we can go in deeper, but Roblox is really nine. Let's go deeper. I want to go back to the nine companies because this is stuff, this is what I meant before we started recording. I was like, you've got all this crazy shit in your head that happened in any of the podcasts. We've got to find a way to get it out. So underneath Roblox, Roblox operating system, it's how we run the company. We have a group of engineers working not on Roblox, but on the Roblox operating system, looking at who are the various teams, how we're organized, how we do all of our things in the company.

28:25Hold on, back up, back up. You have a team of engineers working on the Roblox operating system, which is just the operating system on how to run the company. That's correct. The company building the world. That's right. Okay. Yeah, because running the company efficiently is the most powerful way to then build this vision. So, Matt, I won't go into the extent we use AI acceleration amongst our creators, but having all of our engineers. Why won't you go into it? Well, I don't want to say anything non-public, but I would say that is right in line with Roblox operating system. How does every engineer, product manager, data scientist, designer work in optimal ways?

29:02How does the leader of an individual group, like that game engine cloud thing, how do they actually operate almost like a mini CEO? How do they run that vertical stack? How do they control the types of engineers and product managers? How they compensate them? That's a really big part of how we run our company. And I'd say that the common thread of what we try to do is have as much autonomy on these groups or companies within and then simultaneously, horizontally, just continuously try to connect it together. So we have lots of groups who can go and do things very quickly on their own. And then we glue them together constantly.

29:50How did you come to the design of the way you have the company operating? There was a pivotal moment a long time at Roblox where we were running it as three horizontal stacks. We were running it as the web stack and the infrastructure stack. And what we would see is, you know, someone's working on a specific feature like the social graph. They would have to go and try to get enough bandwidth out of the web stack and the infra stack and the front end stack. So there's always a negotiation. amongst that. And it was hard to say who is building this social graph. So there was a rotation of that where we said, no, someone is going to be in charge of the whole social graph, user-facing components, a web component infra.

30:40And all of a sudden we got a lot of acceleration because they could load balance between all of those pieces. So that lesson has been with us today and actually it runs recursively. So within our, for example, this one group or company I've been talking about, the Game Engine group, that is subdivided into smaller pieces that also run kind of in that same way. Essentially, like you created a series like primitives? Yeah, in a way we're like, we have primitive system for how we run the company recursively from groups to teams to pods. And we've tried to make that somewhat, you know, an accelerant in how we build the business.

31:19But the way you think about these nine, you think of them as almost individual companies inside the company. Is that the term you use? We call them groups, but the leaders of these groups, we want them to feel that autonomy of as much as possible running a pseudo-autonomous thing that intersects with each other. And, you know, it's almost like we would have a game engine simulation company talking to a infrastructure cloud computing and storage company. They work with each other. This sits on top of that. But we want as much speed and autonomy in each of these groups. Say more about how this is organized.

31:55This is very fascinating. Yeah, yeah, yeah. No, we executive staff meeting every Tuesday. We get together four or five hours. Leaders of all these nine companies come together. We go through the things they're working on by themselves. But we go through a lot of times of all of the horizontal things that are bringing them together. What are the horizontal things bringing them together? It's funny, but we track at a ridiculously high level of fidelity, even in our executive staff meetings. So we have probably 50 to 60 things that are core to hitting the objectives we have this quarter, next quarter, the rest of the year.

32:36It's almost like a hand curated list at the company level and group level of things that we think are emblematic as a way of our success. And every week we have all of the key leaders of all of those groups come together and we just go through all that list of 50. So who's in this meeting? It's these nine people, they're reporting directly to you? Some of them report to me, some report to some without, but there's probably, we'll bring in a few other engineers as well. So there's probably 15 or 18 people in that meeting. And we spend an hour just choo-choo-choo-choo-choo-choo. What's the, you got to explain that.

33:11Key deliverable one through 50. In an hour? It's two minutes. It's like one to two minutes an issue. I just recorded with Evan Spiegel, founder of Snapchat. Yeah. And he was explaining his design meeting. And he says, I forgot, maybe an hour or two hours, I have to listen to the episode back. But he's like, we'll go over hundreds of ideas. And we just go through it really, really, really rapidly. We have our core list that goes between 50 and 70. They cycle every month or two or three or four. We're constantly putting new things in. How do you keep track of all this? We have a pretty good office of CEO team.

33:43We have the Roblox operating system. It's got some software in there. My office has, you know, StratOps people, senior people who kind of work with me to do this on the side. So it's very real time. Okay. Can you say more about these nine separate companies? I think you just described two of them. Yeah, we publicly talk about all of them. So I would say there's a people systems company that actually builds the Roblox operating system and has all of our recruiting and people and performance management stuff. There's an infrastructure company, and that's running like our 40 data centers and all of our compute and bandwidth.

34:20Persistence, they're building out cool persistence systems as well. Game Engine, simulation tooling, and Roblox Studio sitting in a group or a company. There is a group called the Economy Group. It's literally all of the things around how we have Robux, how we monetize, how we collect money, the ledger, all of that. There's a very large group, arguably the largest safety and civility group, engineering, product, policy, and live ops under a single-threaded leader, Chief Safety Officer Matt, who can just run that whole thing and make decisions. There is a user-facing group that is all involved with Social Graph, Virality, the various apps we have for having Roblox run in different places.

35:12So it's like a wide range of these user groups. Do all nine of these companies have the single-threaded leader? Some of them are still matrixed. Many of them are single-threaded. We do have some leaders that have engineering under two of them. So it's not absolutely perfect. And in some of these, these are better run by maybe a product person than an eng person. But generally, there's one or two leaders for each of these groups that we know exactly who it is. Do you think that'll be the case a year from now? I think so, yeah. Okay, so you don't see the need to change that? No. All right, so let's go back.

35:48This is very fascinating. Essentially, you've designed a system. That's right. Which is your company to design another system, which is the platform that you're building. That's exactly right. I still don't understand the jump. So within like a couple hours of letting people start building their own game, so now you're turning users back into creators. That's right. But there's no economy there. There's no Roblox. Pure fun. Pure fun. And you're not, there's no revenue of the company at the time? No revenue. Pure fun. Okay, so what is, taking back to your decisions, you're saying it's like, oh, we're onto something.

36:17This is going to work. What's your next thought? So then what starts happening is Roblox started a persistently viral mode. like we could track the growth day by day, week by week. It's like, this is organic growth. This is not paid acquisition. It's just like we're sitting back and watching that. We then, the fun started being there. It was just like 10 concurrent, 100 concurrent, 1 ,000 concurrent, 10 ,000 concurrent. Creations are getting better. We know everything we do with Roblox Studio, the better Roblox Studio gets, the more viral it is the better the game engine is the more viral it is um very early on to eric's credit i think literally on week three or week four in the afternoon when we're now we're sitting there we know the names of a lot of these people there's hundreds of people eric said um we need to build the first safety moderation system and and john and matt and i'll look at it and say you're right he's right oh my gosh like we got to get on this thing so along the way we build like a moderation system we have user reporting all of that for a long time matt and um eric and john and myself we were the moderators like we would switch off so we got to get a vibe of that And so this keeps marching on.

37:48And then finally we say, okay, how can we start making some money on this thing? It's growing. We have costs, all of that. Interestingly enough, this is another example of we had a big intuition around virtual economy. me. We said, we can get this out a little faster if we build this club membership thing. At that time, Club Penguin had a club membership. Can we just charge people five bucks a month or something? So we worked on that for a while. And so we had this thing called Builders Club. It was kind of fun. We started monetizing. Exact same thing as when we started. We had this really fun moment where I was on a camping trip and, um, I could, I could check in how many people are buying builders club every day.

38:42First day it was five and then it was four, then it was six, then it was three, then it was eight, then it was 15. So we're like, okay, we're monetizing. This is great. Um, and so, um, builders club keeps going. And then for about a year or two, because it was working so well. Wow, it's just all viral growth. Viral Builders Club is starting to work. Let's just keep working on the system, making it better and better. It was interesting though, just like in the early days when we started the puzzle game and then said, finally, the market has shown us that's not the ultimate system. Let's build what we really believe.

39:22Something very similar happened with the Builders Club. And we entered this interesting period where user growth was going like this, but revenue and bookings was kind of going like this. And so what that meant is Builders Club was getting a little old and stale. And for the wider range of users, it was really not the right thing. And in retrospect, it's funny because when we started the company, we used taglines like you make the game. And that's a really good early tagline. It's aspirational. Everyone's making games on Roblox. It's definitely not the reality of, you know, a billion users. And in a billion users, communication for many people would be very important without having to make a game.

40:16You know, there's a lot of people that just want to show up and play something. Yeah, I think right now you said, last time I saw you have like, I don't know, 150 million daily active users or something. That's right. 140, whatever the last public number was. Out of those 150, how many are building games? 150 million. I don't know if we give out our latest Roblox Studio numbers, but it's definitely a lot of people, but it's not 10 million. Small percentage. It's one or two million. And I would say the good news is that vision may actually return because I do think over time with AI acceleration and all of the things we're working on, just like maybe in the very early days of video or YouTube was mostly consumptive.

41:00There was a little bit of this early, you know, creation. And then with short form video, I think we've much more, everyone's starting to make videos. I do think there's that potential for something like Roblox. Especially if they can do it in natural language. Exactly. So along the way, we kind of had this revelation that, well, maybe the way Reason Builders Club is getting tired is not everyone wants to be a builder. A lot of people just want to have a lot of fun. And so we had had also a big intuitive vision. What would really be cool, another perpetual motion machine, is virtual economy. And people spend money.

41:37They buy Robux. If we can allow the creators to figure out all the different ways someone might buy Robux without hurting their experience or making it any less fun, then a small portion of users will buy some Robux. They'll spend it in the game. The creator will accumulate those Robux in their Roblox bank account. They'll cash them out for real money. And that should create another perpetual motion loop. And interestingly enough, we actually had a lot of board discussions like, is that a good idea or not? And the board came around. Like, I was probably the biggest pusher of it because I believe some people who were hobbyists would then be able to go and earn a living.

42:27like you could go from hobbyist to earning a living on roblox um if you could do this so we did that very similar to the roblox studio situation we had a full closed loop system and the closed loop system means i'm a creator i can make a game or an experience you can buy something extra for robux could be a flashlight for something as a user i can go buy some robux with a credit card. I can buy that. And also from a discovery standpoint, we started showing top games where people are spending Robux. So same thing within about an hour or two of going live. Oh my gosh, that's the top game where people are spending Roblox or Robux.

43:16More people went into that. And that's going to scale with user growth in a way that the Builders Club would never. And what we basically hit is an elegant, you know, economy that pretty much scales more than linearly with ours, basically. And what we have found without, you know, still optimizing generally for engagement and retention, not for money, is that developer incentive to balance engagement and money. If everyone needs to spend money to have fun, your game isn't viral. So creators have kind of figured that out. And so that's been another perpetual motion machine. Deal will help your business hire, pay, and manage any worker anywhere in the world.

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45:16That is deal.com forward slash Senra. You launched this second perpetual motion machine, this virtual economy, this currency, a virtual economy. How many years into Roblox? Very early on, it's got to be 15 years ago. Okay, so you've been building this economy for 15 years. That's right. Is there another flywheel where it's like, okay, I was making games for fun. I'm a user. You turned me into a creator. That was all fun. Now you're turning me from a creator into an entrepreneur. Therefore, now I make more money. I can also, it has to increase the quality of the games. Quality's gone up, up, up.

45:49I would say quality is ultimately going to be limited, not just by the creativity of our developers, but I also feel an interesting thing about Roblox is in the video space, the camera, the display, they're getting pretty refined. Like 4K camera, 4K 60 hertz display, that's a pretty mature technology relative to maybe, you know, black and white movies with no sound 100 years ago. In the video space, in the video co-immersion space, we're not there yet. Like, we're really excited because there's a lot of technical people at Roblox who I think the ultimate spec is to video what human co-experience can be, which is huge crowds of people, 10 ,000 people.

46:42Realistic. Photo real. Yeah, because right now the games look shitty. We believe we're going to get to photo real. I'm not obviously insulting you. We believe we're going to get to photo real. Isn't it crazy how far you've gotten? Like you hit on something about, you know, deep in our nature. That's right. The fact that you don't want to do things alone. You don't want to shop alone. The core bones of the platform are very interesting. And I think it's almost like, you know, Roblox is very sophisticated, very technically complicated. But in a way, that's the same traction one would have gotten on that early, you know, black and white movie in a movie hall without any sound.

47:23and like some text between the scenes. I just saw something. So you, the fact that you got this far with, because the kids don't care what the game looks like. They just want to hang out with other people. We got pretty far with black and white, no sound movies. But I would, if I was in your position, I'd feel very confident investing and continuing to reinvest into this platform, given how far you got. Could you imagine how big the platform could be if it's photorealistic? Can you imagine 10 ,000 simultaneous users photorealistic on a two gig Android device? What's the most concurrent users? You said Bruno Mars was the most you ever had on the platform?

47:57I think there's two types of concurrency. So in Bruno Mars, we're talking 20 million people. But those are sharded amongst copies of experiences. When we say the technical goal is, say, 10 ,000, that's in a basketball arena. And so running 10 ,000 concurrent people is really technically complicated. They may be all around the world trying to get together. And so when we say concurrency, it's in the exact same environment where you can see and hear every single person. This is why you keep saying that it's like a little secret that Roblox is actually an infrastructure company? That's right. Okay.

48:36You have not yet figured out how to create the technology to do what you're describing, what you want to do, correct? And that's what you're doing every day? I would say part of the job being interesting and fun is I think we have a reasonable idea of how we're going to get there. And so no time frame, not saying when Roblox will get 10 ,000 user, photorealistic, all of that. But I think technically we have a reasonable idea of how we're going to get there. That's kind of exciting. And very hard to compete with. We run the company in a way it's interesting. I mean, we've been in many crazy times, right?

49:15We've been in the PC revolution, the web revolution, mobile revolution, crypto revolution, AI acceleration revolution. We have to run the company almost as if we're imagining a virtual other company who really loves this space. So we have like an imaginary competitor. So we literally think about running the company that way. Michael Dell said this exact same thing on this podcast where, you know, I think five years he stood up and he's like, you know, there's a company that's going to be doing, going to compete in every single area we're in. They're going to be doing faster, better than us. That's right.

49:49And he goes, and we're going to be that company. That's right. And he believes in like, even if you don't have a crisis, you make a crisis. We have to look over here at that imaginary company and then be that company. Very similar to how Dell thinks. I just did this episode on Elon and he said the same thing. He's like, even when it looks like we're going to win, I always assume that we're losing. You know, let's keep that mentality. I want to go back to like, OK, so you stumbled in. There were a couple of years into Roblox's history. Now you have this virtual economy. You can see that it's going to scale way better than Builders Club.

50:20Honam, again, I want to read this tweet because I've got so much information about you from him. And he says, in the early days of the journey with Roblox, a next-gen Roblox, receives$500 million seed round prior to launch. Company was called Improbable. Ho is kind of a spicy guy. He was aptly named. He says, Roblox used less than$10 million of equity to build their business to cash flow break even. Is that true? Yes, it is. Okay. And then you've reinvested billions in your history of the free cash flow in the coming decades from that competitor of this vision that you're talking about. That's right.

50:59Okay. So, and then his point was 500 million, that seed round of this competitor that died is nothing over the long run. I think they're still around doing military simulation. I think the reason it was 500 million, I think that was at the peak of like VC, I think it was Masasan or whatever. Oh God. And that was just, that's the check you get, you know? So sorry, there's no 100 million, there's 500 million. So talk about how you were so efficient, 10 million to get to break even. Yeah. How'd you do that? I think we've always been very good at product management of the surface and always been very good at doing the right minimum viable, you know, walk almost through the space.

51:49so that do less, take the long view, know where we're going, get a lot of stuff on the way. I do think we're pretty good at eliminating distractions. So we're kind of going down the right path. And I think we do that pretty well. What are some of the distractions that you avoided or eliminated? Oh, man. Like there's just, it takes a lot of hubris to build platform because I think everyone, it's so fun to build content. Like we all want to build games and stuff and big complicated features. And a lot of times the features our creators need are boring and purely performance-based. And we have a saying in the company, like performance is a growth feature.

52:41And, you know, we put an enormous amount of work on raw performance features, scale features, those kind of things, that takes a lot of hubris. So what's a raw performance feature? We watch how long it takes on a wide range of devices when someone clicks, I want to play that experience to the time till they're interacting. And the vision would be video. we've come to assume on in video um in short form video i can just scroll through like we're used to that gaming has traditionally never had that gaming has traditionally like you download or you do this screen you have like this background thing people love um i text you or something let's go try this okay we're in people actually like that without maybe knowing it so we we just made the decision we want to get the time to jump into any roblox game down to zero basically and that's very technically complicated um but we do believe it has long-term growth aspects to us okay so you have this engine that is you're now making money yeah right you are staying focused on just building this perpetual motion machine so you're not going on these other side quests and if i'm understanding what you're saying correctly then if you just limit your investment to things that make the user experience better, that will lead to more user growth, more money, more, like now you have this other kind of flywheel going on very early.

54:20That's right. Trying to figure out, basically the line of my questioning is just like, how the hell did you only burn$10 million? Yeah, we got viral very quickly and then we started monetizing very quickly. And then you were just very careful what you used the company money for. That's right. And we did, right? We had secondary. We went public. There's a certain amount of financial prudence where I think we didn't spend any money, but we always made sure we had enough cash along the way. And so, you know, if we raise a secondary round, we might put some padding in there. But we actually never dipped below that initial$10 million.

54:58I heard from Ho and I think other people, like, you were very careful when we were raising money. It was almost like they had to slowly commit. You kept saying, no, no, no, no. With some of the VCs we talked to, we definitely, in that sense, I think we did a really good job intuitively connecting with go-long VCs. And we really, we got very fortunate, whether it was Altos or Greylock or Index or others, that in a way we got VCs, I think, who could risk it all. who could not like, oh my gosh, this is one of my first deals. Like, what are we going to do? You know, could really go along with us. And I think that was very helpful.

55:40So why was it important? You were just worried about dilution? Like, what was, are you a control freak? In some areas, probably, yes. Hopefully in other areas, not. No, but you're pretty vertically integrated. You like to control everything. You build its own data centers, your rendering systems, your AI creation tools. You're funded by operating cash flow. I think there's areas of my life where hopefully, like, I've decided not. We're talking about work. But for roadblocks, knowing what we're building, and I would say it's not just control. I think it's, in a way, owning our destiny, in a way.

56:17So I would say building data centers is... The only way you own your destiny is if you maintain control, right? Exactly. So data center cost, performance, control. Yes. What other areas of the business are you like that with? Our game engine, for example, we always imagined we need a multiplayer 3D immersive engine that does 10 % of everything really well. Early on, it's like, you should use that game engine. You should use that game engine. So, no, that's like a critical core part of our whole platform. We have to build that ourselves. I think you just like building things. We do like that. It's like, go back to your description, like, I built an operating system.

56:57I built the company and then I built the operating system to operate the company. Yeah, it's interesting because we're going to be building some other interesting things that we just decided on. Of course. But do you see where I'm going with this? It's like I want to tie that natural inclination or propensity you have for, we're going to call it control for the time being, to also being very careful not only how much money you raised, but who you raised it from. Is there a connection there? There might be like a thought around efficiency, growth. Because you can control your destiny. That's right.

57:30And there's many components of our stack where we went exactly the opposite way. And we said, we don't need to control that. Like in the game engine business 15, 20 years ago, like what audio system are you going to use? We'll use FMOD. Everyone use it. We'll plug it in. So we don't build everything. Like when we feel we can plug that thing in and use it, we'll go that way. Brian Halligan founded HubSpot 20 years ago, and he has this line about AI that I keep thinking about. He said most companies are using AI to make their teams more productive, but the companies that will thrive make the company itself the intelligence.

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58:36Let's go back to this idea that I've heard you say a few times, and I want to understand more deeply. The dirty little secret of Roblox is that we're actually an infrastructure company. That's right. Okay, explain this. I mean, running Roblox behind the scenes is very complicated. So when Grow a Garden hits 20 million people at the same time, there's a lot going on there. That's 20 million people all around the world. They're playing on a phone, a tablet, a computer, iOS, Android, PC, Mac, Xbox, PlayStation, MetaQuest. They are running translated versions of that experience. They are hitting very quickly on Roblox bandwidth.

59:23They are connecting to data centers in Poland or in Singapore or in Brazil. They are connecting to our core databases as well. And running that is very interestingly complex. Running a 3D simulation cheaply is very complicated. I said a penny an hour. So that is part of why our infrastructure costs are not crazy, is we can do a good job in even some countries that don't monetize very well. So we have core data centers, edge data centers, and we're running a lot of our own CPUs and GPOs all around that. That's what allows us to do that. And you started this from the very beginning of the company?

1:00:08We did, yeah. Okay. Like the very beginning of Roblox was running on one giant server. It was like right over there in my office. Can you describe what you see as the flywheel of the world that you built? I think the flywheel would be akin to saying what's the flywheel, hopefully, of the early phone system. Like way back in that day when AT &T comes out with the phone system. and there's probably some time where only 5 % of people in America had a phone. But imagine the virality of going over to your neighbors, see them making a phone call across town. Oh my gosh, I want to do that too. Look at that.

1:00:51And so, you know, when we look at the phone system, it most likely grew pretty virally. Like there's some early adopters. They're probably really expensive. but over time everyone saw that and so I think that's how we see Roblox going a bit there's a lot of word of mouth as as the quality of the experiences grows on the platform I think we can see correlation in growth there and so if we can technically support what we ultimately think should be on the platform I think there's potentially a lot of growth there. Blake Robbins is a friend He hangs out on the edge of the internet. He always finds these weird things for me.

1:01:31And he's the biggest Roblox bull that I've ever come across. This is the way he describes it. I'm curious if you agree with this. More creators brings more games. More games brings more players. More players spend more Roblox. More spending attracts more creators. If we're ruthlessly pushing forward the quality of our technology stack, our economy stack, our safety stack. So I would say, I think what he's saying is if we walked away from Roblox right now and just kept the lights on, it's possible we would keep growing for a while. But that at the same time would be very, very dangerous and something we would never contemplate.

1:02:12Yeah, the way he described it to me is that Roblox is a compounding machine with network effects and a fully functioning economy. Yeah, yeah, yeah. I think we would, we see, we don't know what that full effect is. We'd never claim that we could walk away and all of that. But I do think simultaneously, we know what we believe is technically possible. And we're literally racing to build that. You mentioned safety a few times. Ho Nam, when we had dinner to prep for this, he said something interesting that you have been, essentially, it's the biggest playground in the world, right? One way to think about this.

1:02:43Biggest playground in the world. Obviously, it's the safest playground in the world, but it's also huge. So there's going to be some kind of, you know, issues that come up. but he actually was saying like the investments you guys have been making for seven eight ten years around safety and ai way before anybody else was you're getting so good at it it's it's actually a moat because over time it's going to get safer and safer that's really beautiful that he said that you know we um we've seen this in self-driving and we're not going to claim we're self-driving but in self-driving say self-driving ends up being 40 times safer than the average human.

1:03:19When there is a self-driving incident in the news, you don't hear that. It's just like, self-driving kind of thing. I do believe the pressure we get in a good way from the media, from this, from that is an incredible motivator for that moat. The vast majority of what we've done on safety and stability, we've done on our own kind of in a visionary way. I'd say age check. We made the call on our own. It's not because of laws or anything like that. But the ultimate mode and the ultimate belief of what is going to be possible. We're going to know the age of everyone. We have AI systems watching content, watching communication.

1:04:03We're banding things. We're not sharing images, all of that. It's an enormous opportunity. And I think we more and more, you know, we're starting to say, look, we know what the gold standard for safety is. we're building it. We're pretty far along. We're actually starting now to see other companies say, oh, maybe we should do what Roblox has done. Or seeing more and more governments say, we like where you're going with this. Like, this is really cool. So I'm really optimistic about, you know, having this force of innovation and what we're doing there. Okay. But is this something that you've been building and compounding since your co-founder?

1:04:42All the way since we built the first moderation system. like the first year or two into that. Okay. That's right. Explain what, like, can you, I don't know if you can talk about this publicly, like what have you built to make it? I think we have seen AI as more consistent over time and scales more than humans. And so the ability to run every asset, everything on the platform through AI, all content, image, everything everyone's building, everything everyone's saying, it just gets better and better and better at that. It's just been an enormous thing. And so when we, you know, part of AI is very much the human facing thing, like, oh, I've got an AI prompt or I can do all of that.

1:05:25Behind the scenes, though, at Roblox, for many, many years, we were pushing very early AI, BERT models, primitive type models to drive safety. So I do believe it's a mode and I do believe we've done something very unique in that what's going on out there right now is we're very upfront. Like we do have people under 13 on our platform. It's an enormous responsibility. We focus on, once again, all of the aspects of how they play and learn and do things. But that's very different than being some other platform that says, oh, yeah, it's okay. No one's under 13. We're good. And so I do think long-term leaning in and being part of that is an enormous capability.

1:06:14Something came to mind when you said, you know, now other companies are looking at what we've done in this. And like, hey, I want some of that too. Would you ever sell this kind of technology to other companies? I think it's worth thinking about. I believe we will end up with the best AI tech for text, for voice, maybe for video, doing a wide range of safety things, either monitoring for critical harms, flagging, adjusting, all of that. It's not unreasonable to think we might do that. We've already started open sourcing some of our stuff. So there's a consortium actually with some various companies involved in safety.

1:06:49We've open sourced one of our voice models. We've open sourced one of our Sentinel models. So we are starting to go in a way down that path. So the majority of the revenue that Roblox makes now just comes from this platform, this virtual economy, this world. That's right. But you have to have a million of these giant model companies coming and wanting to train their data. Because you have 12, 14 billion. What's the hours of a month? It makes it so simple, right? Like we're... But how many hours of... 13 billion plus a month. So 13 billion of actual people interacting. Like, what does this data set look like?

1:07:28So there's a lot of data sets out there that are in video coupled with ASDW. You know, it's just like a human interaction model. What's cool is because we're running this 3D simulator and we're running it on our own cloud. And all of the experiences and games are running somewhat on the same simulator. We have really interesting data. We have 3D location of everything. We have how people are trying to move around with their avatar. We have obviously what they're texting and typing in a privacy safe way. But what's fun about it is we would, of course, never sell that data. That's what I was going to ask.

1:08:09Never, ever, ever, ever. For several reasons. One is just from a values thing of respecting the community. Can you imagine what kind of whacked out decision that would be? Roblox is selling their 3D user data. We would never do that. Also, I believe over time that this data is going to be very interesting data to, for example, imagine a future where a creator wants to make a really beautiful Roblox game and have a bunch of agents working all night long. iterative, Wiggins loops, recoding, testing, recoding, testing. Imagine just like we do with code now, a creator wanted to do their whole game that way.

1:08:53So we go back to you guys are buying 50 users a day from Google. Now, if you're building a game on your platform, you can actually use real, like the data from actual users on Roblox to test what you're building? There's a level of indirection there. I would say that - What's the indirection? The level of indirection is making amazing NPCs that look and behave and act like humans by training on that data for our users. So what we'd like to be able is you're building your cool experience. You want 10 ,000 virtual testers. You want to describe how they act, what they do, and put those into your experience and use that to test overnight.

1:09:36I like that idea a lot. That's very interesting. Your stock seems to be like all over the place sometimes. Why do you think like you have these huge Roblox bulls or it's just like this is a compounding machine. And then what do you think is like most misunderstood about what you're building? Why wouldn't this keep getting bigger and more valuable in the future? I feel like I can't predict the stock market. No, I don't care. And I think ultimately, you know, it's showing, I think the future for many companies is like, Like we're in a time right now where raw user growth and engagement growth is mixing with a lot of factors.

1:10:14I think technical excellence, continued innovation, having people understanding where we're going with this. I mean, there's just going to be more and more of that. So I'm optimistic. And you see AI as a giant tailwind for you guys. It's an interesting time, right? Like it's a really interesting time. People are questioning all types of different types of companies, what companies are going to grow twice as fast, what companies are going to this happen. For us, it's so many areas. It's not just making games better and faster. It's increasing quality, time to market of experiences. And I do think ultimately AI will power some of what we've said around our ultimate spec.

1:10:58Are there completely AI-generated games already on the platform? I would say we're getting close. And I'd say right now, Roblox Studio is starting to embed a pile of AI capable type functionality. The beauty, though, that we have all of our Roblox cloud open to MCP server and all of that stuff. Now we're just seeing devs like push at this with AI coding tools and creator tools and like start to create that flywheel. And these can be relatively small teams, even individuals that make wildly popular games, correct? Absolutely. So let's get something, I don't even know how long it's taken me, why it's taken me so long to get into this part, because this is the part I'm actually most fascinated with, is the size of the businesses that people are building on the platform.

1:11:40I mean, DevX is well over a billion bucks a year. You know, that's the amount. Explain to people what DevX is. And that's the amount of raw money flowing to creators on the platform. it's really been I'd say it's a really interesting time because in the midst of AI throughout the game industry as a whole there's been a lot of maybe legitimate concern about a lot of creative people of having AI displace what they do the thing we've said is we believe that money flowing to creators is going to increase not decrease and so that's pretty good news if that money flowing to the Roblox creative community is increasing, we should see even more opportunity for creators.

1:12:27We've also seen something really interesting. You know, top creators on Roblox are making tens and twenties and fifties of millions of dollars. Like these are pretty serious. I heard some of them are making that a month. I don't know. I can't say that, but I would say they're making... They say that. I don't know if it's true. I heard three kids in the middle of nowhere making$25 million a month. I won't confirm or deny, but I would say like one thing when you hear that as a measure of platform health is if we look at the year-on-year growth rate of creator one, 10, 100, and 1 ,000, creator 1 ,000 year-on-year is consistently growing faster than creator number one.

1:13:04Wait, say again? The curve is even flattening more. The growth rate in bookings per year for creator number 1 ,000, ranked by how much they're making, they are growing faster than creator number one. How? Curve is flattening, wider use around the world, more opportunity for vertical content, more opportunity for some content for older people. So that is a flattening of the curve, which bodes well for creator 1 ,000. What does the long tail look like at the very end? They're making a couple hundred bucks a month? Like, what is that? Like,$10 a month? I think the top thousand is on average making a million bucks.

1:13:42I heard it's higher than that. I think it's like$1.3 million. Okay. And then I think as we go beyond, though, that curve goes way out to creator$10 ,000 beyond where there's significant money being made out on that part of the curve. Do you see a world, do you think about how, like, in the last, like, decade and a half, you know, like, when you ask people what they wanted to be when they grow up, like the YouTuber wasn't even on there, you know, 15 years ago. Now it's like always in the top, you know, five or three or whatever the case is. If you do have this perpetual motion machine, you keep going.

1:14:12And I think once people understand the size of the business that they could build on this and they have a love for what they're doing, you know, you're usually only really great if you actually love it. Like, I think being a Roblox creator could displace being a YouTube creator. Who knows? Why do you make that noise? Before you said who knows, what was that noise? It's funny because I get these short form videos in various platforms of really cool Roblox creators living in like this giant studio, driving these cool cars, doing short form video about how cool it is to be a Roblox creator. I think what they're saying is if you do this, there is the potential to make a great business.

1:14:51So what do you guys do to foster like that message or foster the size of the businesses that can be built? That's pretty viral. People know. I think what we're trying to do is create the tech, literally, like you said, the technical infrastructure. So more and more of them can bring their ideas to reality. Like we've said publicly, we want to get to 10 % of global gaming on the platform. I think that means taking that black and white film projector and turning it into a 4K projector in the gaming world. So, you know, we think a lot about the responsibility of building the platform for them. So the more photorealistic that it gets, the wider the market gets.

1:15:35I think in many dimensions, concurrency, performance, cost, photorealism, ease of creation, AI acceleration and creation, all of those things help bring ideas to reality. But out of all of those, what is the most important you would think? I'd say it's load balanced, actually. So I think one of the good things we've done is, if I looked at that mix and I looked at where our engineers are working, it's not like everyone is working on that one thing. We've got a balance of those things that are pushing forward. Do you have funds coming in and trying to buy up these games and rolling them up? There is a market out there.

1:16:14I think if anything, we're trying to get the message out to our creators. like our DevRel team can help you assess what your game might actually be worth because a lot of them are worth a lot of money. Platform itself has never tried to buy any of it. We never have. I think what we want is some transparency in the market so early creators can actually know what kind of a gem they're sitting on. Have you seen people being taken advantage of? Not really. I've seen amazing actually profit sharing, revenue sharing, like things that have really worked out for buyer and whatever. But I do think over time, we want there to be a lot of kind of transparency in that.

1:16:56It's almost like you built a game to play entrepreneur and you turn them into real entrepreneurs. In a sense, it's an entrepreneur game. Yeah, if I wanted to teach like a, you know, a ninth grader about, you know, entrepreneurship, like Roblox might be the best place to start. you could literally um teach them how to use ai coding tools come up with a crazy idea get it live um on roblox now they could buy traffic they could spend fifty dollars um same thing buy users on roblox that whole cycle yeah i'd be very interested in that because when i talked to toby luke the founder of shopify um he said something interesting like he thought you know his job is to create more entrepreneurs like that's the way he looks at what he's doing i think yeah i think it's more important than ever, especially with young people.

1:17:40If you look at their empathy or their way more attracted to socialistic ideas than I think your generation was and definitely my generation was, especially in America. It would be fun to imagine an entrepreneurship class that kind of connected all the dots. I build this, do this, can see this happening. That could be super educational. What's your biggest threat that would inhibit you from building what you want to build? Like what you're describing is long-term. I actually feel the biggest threat would be not imagining that competitive company and not building what we think that competitive company is.

1:18:21So the biggest threat could be complacency rather than we can see what's technically possible. Let's build that. How often does this imaginary company come up inside the discussions you're having in your real company? Now and then, I would say given the speed at which we think some stuff's happening, actually, it's interesting. The whole history of the company has arguably been a motion from quarterly things, monthly, weekly, daily. Like the whole pace of our company, I think, has just been a historical acceleration of the pacing of the company. The pacing at which you move? Pacing at which we make decisions, pacing at which we gently adjust without swinging the tiller widely, the speed at which we check in, the speed at which we track things, it's gotten faster over time.

1:19:16So the way I would think about what you've been telling me is you have this excessively long view. The fact that almost 25 years ago, you're like... That's actually one of our values, take the long view. Okay, well, so 25 years ago, 20 years ago, this is going to be the last company that I'm going to work on. So, therefore, you even said, I think, early in the conversation, it's 30, 40, 50-year kind of view. So, an excessively long, longest view in the room, basically. So, I think about this with infinite number of daily iterations towards what you're trying to build. A combination of those two?

1:19:48Totally. The infinite iterations would be a complementary value, which is get stuff done. And so we say get stuff done means continuous iteration, but pointing in the right long direction. So something we haven't talked about, but I think I heard you speak, I think you said this in your Stanford talk, which I thought was interesting, that there was multiple like near-death experiences or almost death experiences of Roblox. We haven't talked about that at all. There were several. I think one was the economy thing. Like if we had not figured that out, that would have been very dicey. Looking back now, I mean, you were obsessed with science fiction.

1:20:23There were all these other like virtual economies, right? At the time. There were. Second Life. Second Life. There.com. Yeah. All of that stuff. So were you taking ideas from that as well? There.com and Second Life, they really were early and in parallel to us. In a way, they were so early and so parallel, they made these very big visionary things. You know, Second Life's architecture was contiguous earth kind of thing, which had some issues around scaling because in a contiguous earth type situation, which is just the way the real world makes, there's only one copy of that roller coaster. And when 30 people want to go on that roller coaster, no more can go.

1:21:07So we, I think we were a lot more practical around scale. We're just like, no, man, if there's 100 ,000 copies of that roller coaster, we're going to figure out how to route people to that. So we could have 10 million people riding the roller coaster. But there were a lot of early visions out there, I would say, at the same time, for sure. What was the argument from the opposing board members to doing the economy? We had a lot of fun going on the platform. like we're just like whoa everyone's having fun building you know this viral stuff would we distort it if people could make money and but the idea the idea that look in the traditional game market you have studios with hundreds of people like we could probably get better quality if we nudged in that direction other near death or rough things is our economy got hacked once so we had to like shut down the whole economy for two days literally that was somewhat scary and the reason is we had just been so early moving so fast that our the way our economy was working right now wasn't like double entry bookkeeping and journaling and all of that and we had no flow control anywhere in the economy so this was a famous economy hack very early in the days of Roblox, where the second the economy was hacked, money could bounce from place to place very quickly.

1:22:30We caught it pretty quickly, and we just said, shut everything down. We had to shut Roblox down for a while, then bring it back up without the economy on. Luckily, we caught it pretty quickly, and only a small portion of the money had moved around. But we had to run for several days with no economic activity. Were you already a public company when this was happening? No. No. No, no, no. Yeah, the SEC does some really good stuff. And I would say some of the good stuff, if we go through a lot of the controls in the SEC, those were things we did 15 years ago, as far as this economy and backups and all of that.

1:23:07When you were designing this, were there any books you were reading? Or were there any examples? You're like, okay, I'm going to take an economy that I see functioning well in the real world and just make the virtual version. How did you even come up with the set of rules that you had? I would say all four of us founders We're very into high integrity systems, like what's the amount of float in the economy, how much currency we have, do you trade it and not trade it. We saw very early on in our economy, we had something really interesting in the early days of video games, people would have multiple currencies.

1:23:40And we had something that in retrospect, the Roblox community really loves, but isn't really a good idea, I don't think. and that is a participation-based currency called Tickets as well as a money-backed currency called Robux. The thing that comes out is when you have a participation-based currency, you get one ticket for every day you log in. That's really not a very good way to have people log into your system. You know, it's much better. They just love chatting with their friends or playing games. The other thing is any currency that a user can get from work or log in will immediately be bought it now.

1:24:24And so we could see people trying to bought that currency all day long and we had to ultimately get rid of it. So we had some good learnings with that. But ultimately, our current economy, as I've said, is kind of scaled better than linear with user engagement. You mentioned there's an advertising business inside of Roblox. That's right. How long has that been going on? It's just started, pretty recent. But if you go onto the Roblox homepage, you can see some of the experiences, say, sponsored right now. We have a long-term vision of what percent that is. But it's actually really helpful because most of our discovery, primarily organic, we've been very transparent with discovery.

1:25:07And so one of the things that Roblox creators like is we share all of the signals of what's boosting something. It's almost as if we were YouTube or TikTok or Reel saying, here's all the factors that bring you up here. But for some creators who want to do that entrepreneurial experience, buy 50 users very early, their game isn't viral yet. They can use that sponsored thing, just like when we bought traffic from Google. I got one more question for you. Okay, we're almost out of time. Are you jumping up? You want to leave already? No, I'm stretching. I want to give an expansive answer. Why do things like this?

1:25:46Why are you doing podcasts? I do feel there's a lot of depth to the way we run the company. That podcast is the format to get it out. And I love podcasts. In today's media, if I know who the podcast is, like that's all I need to find great content. I like podcasts because it's typically not edited. It's not showing up in a discovery mechanism. So I feel it's one of the truest forms of media. Okay. I'm glad you used the word depth because what I want to do is it's right out of time now. I want to run this back like as much as you want, maybe every six months or something like that. Because I do these selfishly.

1:26:27I'm obsessed with making podcasts, but I'm obsessed with entrepreneurs. And I want to know, something Toby Luque said to me that was fascinating. It's just like, there's not like one right way to do something in a company. There's probably like a hundred right ways. That's right. And you have to figure out like what makes sense for the context you're in and then who you are as the founder and like what you're trying to accomplish. And I have a better understanding of you, way better understanding than when we started the conversation, even though I've listened to every single interview you've done.

1:26:51Your company is very misunderstood and there's not a lot about you as a person. And yet I find these people that I respect their opinion very much. And like, this guy is special and the way he's building his company is interesting. and I'm still, I feel like I just like scratched. I'll take that as a compliment. You should take it as a compliment. You built something amazing. Thank you. So thank you very much for the time. I hope you accept the invitation, the future invitation. And every time we have this conversation, just like peel one more layer of the onion of like what you're building and why you're doing it.

1:27:19I think it'd be very fascinating. It'd be fun to peel another layer. All right, perfect. Thanks man. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review and make sure you listen to my other podcast founders for almost a decade. I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.