MGA Entertainment: Isaac Larian

29:43When it crashes, so can you. That's why Lingo is so interesting. Lingo is a glucose wearable designed to help you connect the dots between your glucose and what you eat, how you move, and how you feel. It shows your glucose data in real time. Instead of guessing, you see the impact of your choices. Maybe that healthy snack is actually sending your glucose on a roller coaster. Or that afternoon walk is the perfect stabilizer. It's about unlocking your consistent best all day long by truly understanding your body's unique responses. Get to know your glucose and learn about how to build healthy habits that work for you with Lingo, designed for you by Abbott.

30:23Through November 30th, use code GUI10 on HelloLingo.com to get 10 % off a Lingo plan purchase, one use per customer. This offer cannot be combined with other offers, U.S., Puerto Rico, and U.K. only. The Lingo glucose system is for users 18 years and older, not on insulin. It is not intended for diagnosis of diseases, including diabetes. Individual responses may vary. This episode is brought to you by Klaviyo, the only CRM built for B2C and the key to making Black Friday and Cyber Monday your biggest wins yet. When the holidays hit, your competition only gets louder. That's why the most successful brands use Klaviyo to cut through the noise and build personalized relationships that drive more revenue.

31:10With Klaviyo, you get marketing, service, analytics, and all your customer data together on one AI-powered platform. It's everything you need to build lasting customer relationships. Send exclusive email offers to your VIP customers. Deliver perfectly timed text to high-intent shoppers. Maximize your ad dollars with precision. Join the more than 176 ,000 brands, including Away, Patrick Ta, and Dollar Shave Club, already growing with Klaviyo. Make this holiday season your best yet at klaviyo.com. Hello, guy. This is James Caton from Ave Maria, Florida. And my favorite episode is your interview with Kendra Scott.

32:02That is my 12-year-old daughter's favorite brand, and your episode allows me to have a conversation with her around grit and perseverance and what it takes to be successful and that it isn't as easy as it seems at the end. There's a story behind every famous person, every famous brand, and every famous woman. If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is, and why. A lot like the voice memo you just heard. And email it to us at hibt at id.wondery.com. And we'll share your favorites right here in the ad breaks in future episodes.

32:43And thanks so much. We love you guys. You're the best. And now, back to the show.

32:55Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 1987, and Isaac's toy company, Micro Games of America, has just had its first big success, importing and distributing the Nintendo Game & Watch. All right, so this is a huge, huge fad. I mean, I had him as a kid. I'm sure people listening remember Game & Watch. But I guess about, like with many things in children's toys, that was a fad that kind of passed, right? About two years in, sales started to fall. Right. Just because what? Because kids at a certain point moved on? Yeah, they were looking for something new. That was something I learned from that.

33:40Literally two years on, I was sitting in$10 million of inventory. And it wasn't moving? No, and the interest rates were 19 % at the time. And I had a line of credit with Mitsui Manufacturers Bank. I didn't have money to pay them. So I liquidated that merchandise for 25 cents to a dollar. So you saw that there was something in toys, but you also got burned by toys. Because I think when Game & Watch kind of that fad surpassed, it was also the rise. Nintendo had another product that they released called the Game Boy. and you did not have the license for that. How come you didn't get the license for that?

34:25Because that would have made you tons of money. Yeah, so that's very interesting. Nintendo watched the success that I had with Game & Watch. And I still to date say that Nintendo was inspired by the success of my Game & Watch to come up with Game Boy. And of course, they didn't want to give me Game Boy. I asked for it. They wanted to control the distribution of it. So you did not get the Game Boy license. No. And in the meantime, I guess the consumer electronics business was keeping you afloat, right? Yes. But I also decided to go to licensed handheld games. Handheld games like Nintendo, but for different franchises like Star Wars and Batman and things like that?

35:12Exactly. So I got the license for Star Wars. My son Jason at the time was fascinated with Power Rangers. So I went to Haim Saban and got the license for... How you negotiated with that guy. I don't know, two master negotiators sitting across from each other at the table. I mean, I don't even know how that conversation begins. Yeah, it was fascinating. I got to tell you, and Haim, I don't know if he remembers this or not. So Power Rangers was so strong, and we were selling so much. And I called him one day. I said, can I come and see you? His office was in Bear Bank. I have a big royalty check for you.

35:56So he said, yeah, sure. I went there. He made me angel hair pasta. It was delicious. I gave him a check for$720 ,000. Wow. And guess what? Week after, he sent the auditors to come and auditors because he thought, and I still talk to him and laugh about it, because he thought I was cheating him. It could have been more. But in the end, you were cleared. Oh, yeah. The auditor came and said, no, they gave you what she had. Yeah, exactly. And we became friends. You never let him hear the end of it. If I'm here listening, Isaac is not going to let you hear the end of that. Yeah. But, you know, fair enough.

36:38Fair enough. Listen, you got to be on your toes, right? Okay. Right. All right. So you're doing some licensing. And I think a lot of what you were doing was electronics games. Right. But I think around 96, this guy named Joe Truchus, I think is his name. He came to you with a doll that he had created. And he had pitched to Battelle, but they didn't want it. and it was basically a doll that bounced, and when you bounced it, it would sing, something like that? Right. Bouncy, bouncy, baby, me, I still remember that song. And he says, I want you to make this doll. It's going to be big. I said, come on, Joe, you have gone to metal, you have gone to taiko, you have gone to toy biz, you have gone to everybody.

37:23Everybody said, no, why would you come to me? I don't know how to make dolls. And he said, they're stupid. it, they don't understand it, but you're an entrepreneur. You understand that this is a good toy. And so I said, okay, all right, let me try it. So I took the sample to Hong Kong, sat with two factories who make dolls for metal. And I said, if you make these for$5, I'll buy 200 ,000 pieces. But did you, just going back for a moment, this guy was rejected by every major toy company, and companies that did dolls. You did not do dolls. You did electronic games. How come you thought, all right, let me do this?

38:04I mean, you knew nothing about this business. I like the toy, you know, and I have the personality when somebody says to me, no, you cannot do it. I'll take that as a challenge. And I made the sample. I went and sold it to Toys R Us, sold it to Target, sold it to Kmart. They all liked it. You pitched it to them and you showed it to them and they said, all right, we'll take it. Right, exactly. And at that time, you had to make TV commercials and put it on Nickelodeon and Fox Kids to sell the product. And you needed to have at least four major retailers in order to be able to afford to go on TV.

38:47But then I went to a guy named Ron Stover who was the buyer at Walmart. and he says, I won't buy it. I said, come on, Ron, why? He told me, Isaac, you are Micro Games of America. Nobody will buy a doll from a company called Micro Games of America. I said, Ron, I'm going to change the company name right now. I'm going to call it MGA. And he says, you're too fast for me. Okay, all right, I'll buy it. And that just took off. Huge. Wow. And at the time, in order to get into those stores, it was like a chicken and egg thing. You had to have TV ads on Nickelodeon, which probably just the marketing of that thing was, what, millions and millions of dollars, right?

39:33Right. So they would demand that you have an actual TV commercial. Ready. When you went to pitch it, ready. You had to have a commercial ready when you pitch it. So you had like a VHS tape that you put in and you had like a big TV and AV system in a boardroom. And you're like, this is the commercial. Exactly. Wow. So you had to spend all that money just for the pitch. I had to spend$125 ,000 to make that TV commercial. Wow. But by then, I mean, by that point, you were doing well. But MGA was still, I guess, a relatively, would you call it a small business? Yeah, we were a small business. We were doing less than$100 million at that time.

40:12Okay. So very nice business. But tell me about what you took away from that experience with that singing Bouncing Baby Doll. Was your mind kind of blown? Or was there a moment where you thought, uh-oh, this could be like the Nintendo Game & Watch. You know, we might be stuck with$10 million worth of inventory that nobody wants in a year. Yeah. So I was actually, I learned from my mistake, from my failure with Nintendo Game & Watch. And this time I did not buy inventory like crazy. I would sell to retailers on what you call FOBs, free on board. So they had to open a letter of credit and buy it.

40:47So they owned the risk, not me. And from one doll, we became, next year we had Battime Bouncy Baby, we had Giddy Up Baby, and we became one of the biggest doll makers. So essentially what you're saying is, unlike the Nintendo Game & Watch, which required you to buy the inventory, hold it, and then sell it, you sold the dolls already before they were manufactured? Yes, most of it. Wow. Okay, so you've got the doll, but you're also doing a lot of licensing, as you mentioned, right? Because you've got the Power Rangers, and I know you did licensing with Pac-Man and Space Invaders. And so I wonder, so when did you start to say to yourself, maybe I need to focus more on building IP, our own property?

41:36Frankly, one of the things that was a turnaround for me was when I got the license for Star Wars, nobody wanted Star Wars. And the license for Star Wars was to make a handheld game? Right. Handheld games and walkie-talkies. Crazy. This is in the late 90s. Nobody wanted the Star Wars license. It's one of the most valuable properties on Earth today. It's crazy. Yeah. So I got the license. I got it pretty cheap, and I got it exclusively. Because at the time, it was owned by George Lucas. Right, exactly. And then Lucas said he's going to make a new movie. And all of a sudden, the demand for Star Wars went up.

42:22But then I still have the exclusive license, and it's two years left of the contract. and when I went back to Lucas to renegotiate the contract, they said no. And they had given it to Tiger Electronics. And that really pissed me off, to be honest with you, because I had worked all these years when nobody wanted Star Wars. And we ended up in litigation with Lucasfilm, which I won, but that really put a bad taste in my mouth And I said, the hell with it. I don't want to work for these entertainment companies. I want to make my own IP. Meanwhile, I want to talk a little bit about something that was happening in the background.

43:12This was your relationship with your younger brother, Farhad Fred, who was also your business partner. Because from what I've read and understand, there was tension between the two of you. You wanted the company to grow faster. He didn't. He wanted it to grow more slowly. Right. And, you know, Isaac, everybody's got family and family is sensitive. And so we talked about this gingerly. But I guess it got to a point where the tension was it just it wasn't working. And you offered to buy him out around 2000. And you guys valued MGA, your company, at$20 million. Right. Basically, he had about 45 percent of the company.

43:49You gave him about$9 million to buy him out. And that was it. He was out of the company. Right. Just putting aside the financial transaction, from a family perspective, what did that do to your relationship with your brother? You know, we had, frankly, I love my whole family. I love my brother. And it bothered me that the business became like business situation like this happened. And I had offered him because we were fighting every day. I had offered him either he buys me or I buy him. And I did buy him. And, you know, and I asked him to keep some of his shares in the company. And he said, no, thank you.

44:37Good luck. I'm going to go on my own. But unfortunately, he sued me. Yeah. He sued you a few years later because of the success of Bratz, which he felt that you had known about it when you bought him out and that he would have made more money. And like anything, it's complicated. But of course, money can always tear apart friends and family. Right. Absolutely. So to me, that was really like a stab in my heart. It was, in our culture, it's unthinkable. To sue your own relative. Yeah, exactly. You won the case, the court found in your favor. but I imagine it was very tense. Did it, what did it do for the extended family?

45:28I mean... Yeah, it created a lot of rift and issues within the whole extended family. I mean, Fred being the younger one, my mother started saying that, oh, no, give him money. You have made money, give him some money. Give him the money. And my dad, may he rest in peace, told me, I know you didn't do anything wrong it is not your fault he made a mistake but please forgive him and later on we reconciled but I told him it's like when you have an expensive piece of porcelain and it falls and it breaks you can get crazy glue and put it together but still you can feel the crack. Yeah. And you're not the first or the last brothers to have a rift.

46:26And it's hard when you're somewhat estranged from family. All right. Meantime, so you buy him out and sometime around, I guess late 2000, you're approached by this guy named Carter Bryant, who was, I guess at the time he was a freelance designer. And he comes to you with some sketches for a new kind of doll. Yeah. So, well, but you got to go back a little bit. This guy, Ron Stover, who was the buyer, I told you about Walmart. Yeah. Very tough to sell products to. I came with the next doll. He said, no. One day he took me to Walmart right across the street from Walmart headquarters and showed me this 98 feet of Barbie products, all in coffin boxes.

47:16He says, Isaac, you see this? They do everything for me. They own 90 % market share. They come and set up the planogram. They sell, and I make my bonuses every year. Why would I take a risk and take a portion of that and give it to you? I said, Ron, what if I came up with something that was better than Barbie and you didn't buy it, you're going to feel left out. He said, if and when you do that, I will buy it. So I said, okay, remember this. I came back and told my design team, give me something that competes with Barbie. And everything they showed me was a Barbie knockoff. So one day, and I used to take my kids to work, and my daughter Jasmine, I think at the time, was 10 or 11.

48:07And this guy comes in, his name is Carter Bryant. And he says, I have the next doll concept. He showed me these drawings and they look like aliens. They were these like plump-lipped dolls. Yeah, probably big face. Big heads, yeah. Yeah, exactly. So I said, I'm not sure if this is going to work. And I asked my daughter, and she says, Dad, they're pretty cool, actually. So I asked this guy, OK, how did you come up with this? And he said he works at Mattel. I said, OK, but where did you make this? If this belongs to Mattel, I don't want it. And he said, no, I did this in Missouri, where I was not working for anybody.

48:59I said, okay, you quit tomorrow. You come here and work on this. You're going to give it a chance. He said, I don't want to be an employee. I said, okay, what do you want? He said, I want to get the royalty. I said, okay, fine. We give you 3 % royalty on the dolls. But you must quit Mattel and come here right away. All right, so wait, just to pause for a minute, because I think this has been ruled on in court. You're saying that Carter Bryan came up with this idea for Bratz on his own during a break, like a period of time when he wasn't working for Mattel. Right. But then later, when he approached you at MGA, he was back to working for Mattel again.

49:35Right. And did he ever pitch Bratz to Mattel? No, because I said to him, why didn't you show it to Mattel? I said, Mattel will never do a doll that competes with Barbie. Barbie was on the pet stool. So the biggest mistake he made, Guy, was he decided to be a nice guy and give Mattel two weeks notice to finish some of the things that he was working on. Because that two-week period essentially later on would be the basis for a case that Mattel would file. Bring against you. Exactly. We'll get there. But he brings you this. So on the strength of your daughter saying, hey, these are cool because you thought they looked weird.

50:14Right. But on the strength of your daughter, you said, okay, let's see if we can maybe do something here. Right. By the way, did he call them Bratz Carter or did he have a name for them or no? Yeah, he called them Brats. Brats. Brats with a Z. Yeah. And these dolls were going to be the anti-Barbie in a sense because they were going to have big heads and different sort of street fashion. And they actually looked more ethnically different. Yes. They didn't look like a Northern European white. I mean, there were other, there were non-white Barbies, but basically the archetypal Barbie was. Right, exactly.

50:48So we decided to make what we call Brats Pack. And I insisted we make all four, four dolls, and sell all four together. In one package? Yeah. No, the retailers had to buy a pack of four. But as an individual, you could buy one. You could buy Sasha, you could buy Jade, you could put Yasmin. And what were they? Yasmin was, she was based on your daughter, so she was more sort of Persian looking. Yeah, but you know, what I didn't want to do is bring a stereotype. So, like Sasha was supposed to be kind of African-American, but not African-American. Or Jasmine was supposed to have olive skin because she has olive skin, but not Persian.

51:33I mean, I remember I went to Brazil and I asked a whole bunch of kids about Jasmine and they said, oh, she's Brazilian. She's Brazilian. Yeah. So, basically, we did that on purpose to make sure that it appeals across the world. And how long did, so he brings this to you in 2000. Yes. How long did it take to get a physical prototype of a doll that you could show to Walmart? Yeah. So I said, we need to have samples with packaging ready for Hong Kong Toy Show, which was on January 2nd. Yeah. And they said, there is no way you're crazy. Yeah. It's not going to work. I had a head of sales and marketing who worked for me who used to work at Mattel before.

52:21And he told me, anybody who has taken on Barbie has gone out of business and gone bankrupt. Hasbro tried. Don't do that. You're going to go out of business. I said, no, we're going to do this. He quit because he says he doesn't want to have a failure on his resume. Wow. So I take these four samples to Hong Kong. And this is a trade show at Hong Kong? Right, yes. Okay, and this is an important trade show. Very important trade show. So we show this to Target. They like it. The buyer says, yeah, it's different. We'll buy it. We show this to Toys R Us. They said, yes, we will buy it. Bandai in Spain, they liked it.

53:03And they said, yeah, we will buy it. Comes around Stover. Again, he says he won't buy it. The Walmart buyer won't not buy it. Okay. I said, why? And he says, they don't look attractive. So I was so pissed off at the time. I went all the way up to the CEO of Walmart. So he told them, OK, Ron, buy it. So he says, OK, I will buy it, but I only want Chloe. Only blonde dolls sell. And I said, Ron, you know, my daughter was born in America, but she has darker skin. She doesn't want a blonde doll. She wants a doll that more looks like her. If you want to buy this, you have to buy all four or I won't sell it to you.

53:51He ended up buying it, but one pack, only one. Can you imagine? You had to look for it in the Sea of Barbie to find it. It was just one sort of like one part of the shelf, a tiny part of the shelf. Yeah, just one box at the bottom left corner, the worst area of the shelf. So that's what happened. And we launched the doll first, believe it or not, in Spain. They were first in the market. And the product sold out instantly, instantly. Wow. Toys R Us USA, Deborah Trale was the buyer. She gave us an order for$6 million on FOB. Yeah. And we started advertising. On Nickelodeon and the usual channels?

54:41And Fox Kids. Yep. And the doll didn't sell well. The doll didn't sell in the U.S.? At that time, no, it didn't sell well. But it was selling in Spain. Yeah, it was selling in Spain, but it wasn't selling well here. And the reason was we were not putting enough advertising behind it. But you were advertising on Nickelodeon and Fox Kids. Yeah, but not enough GRP to, you know, instead of spending$2 million,$3 million, we were spending a million. And we were not getting enough eyeballs on it. So there wasn't awareness of the dolls. They might have been on the shelves at Target and at Toys R Us. Right, yes, exactly.

55:23But kids were just passing them by. They didn't know what they were. Yeah, exactly. Okay. So comes October of 2001, Toys R Us cancers, five and a half or six million dollars worth of Bratz orders. Wow. I thought, now for sure we're going to go out of business. So I went without my wife's approval, got a second mortgage on our house. and put another$1.5 million TV advertising on this doll. Wow. And the sales went through the roof. What was the ad that you did? I wanted to have a live action animation combined and with the great music because that was going to cut through the clutter on Nickelodeon.

56:14It was a little different. And now we pumped that TV commercial and it was so catchy. The sales went through the roof. Wow. And Toys R Us came back to us, I think two days before Thanksgiving, said, we want to buy that order, we want to buy it back, that order that we canceled. And I said, those goods I don't have anymore, but I have goods in LA and they cost 25 % more. And they bought it. They bought it and I paid off the market. That is unbelievable. So basically the dolls were not selling. Toys R Us had canceled their order. Many people would have just kind of said, okay, this is not going to work, and let's figure out how to reconstitute the business.

56:57But you had probably invested. How much had you invested in Bratz at that point? Oh, my God. I had put everything we had behind it. Like how much, do you think? $10,$20,$30 million? More than$15 million. More than$15 million. So if that didn't work, I would not be in business right now talking to you. I would have gone bankrupt. You bet the farm on the thing. I bet the farm and my house on it. When we come back in just a moment, how Bratz and Barbie and their parent companies wind up in court in a bitter dispute that lasts for years. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

57:46The holidays are upon us and businesses are hiring for seasonal roles. Everything from haunted corn maze workers to snowplow drivers. This means that people with certain skills, experience, or even a special license are in high demand and not easy to find. Whether you're hiring for one of these roles or any other role, the best way to find the perfect match for your role is on ZipRecruiter. And right now, you can try it for free at ZipRecruiter.com slash built. ZipRecruiter's matching technology works fast to find top talent, so you don't waste time or money. You can find out right away how many job seekers in your area are qualified for your role.

58:27Let ZipRecruiter find the right people for your roles, seasonal or otherwise. Four out of five employers who post on ZipRecruiter get a quality candidate within the first day. And right now, you can try it for free at ZipRecruiter.com slash built. Again, that's ZipRecruiter.com slash built. ZipRecruiter, the smartest way to hire. It seems like every day we hear about how AI is coming for our jobs and people are getting anxious and fearful. But a recent survey from Miro reveals that 76 % of us believe that AI can actually benefit their role, while 54 % struggle to know when to use it. Well, enter Miro's Innovation Workspace.

59:14It's an intelligent platform that brings people and AI together in a shared space to get great work done. Miro has been empowering teams to transform bold ideas into the next big thing for over a decade. We've recently started a new project using Miro, and it's a really awesome creative partner. It helps us develop better processes for organizing. It even generates new ideas. You don't have to be an AI master or toggle to yet another tool. The work you're already doing on Miro's canvas is the prompt. Help your teams get great done with Miro. Check out Miro.com to find out how. That's M-I-R-O dot com.

1:00:06Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2003 and Bradstalls are a huge hit. MGA Entertainment sells a billion dollars worth. And that cuts deeply into Barbie's dominance of the doll market. So the maker of Barbie, Mattel, starts to investigate. They started to find out about the origins of this product because they had a feeling that maybe it was stolen from them. The IP was stolen from them. Yeah. When you look at the history of Mattel, they have basically used litigation as a business tool to put competitors out of business. And this is, by the way, this is a playbook that many big companies use to try and quash upstarts.

1:00:54But your trajectory was so fast, it must have overwhelmed Mattel. I mean, you got a billion dollars within a year and a half. And then by the end of 2005, two, two and a half billion dollars of Bratz had been sold. You really, it was like, and what was the appeal of these dolls? Why do you think that those dolls just landed with girls? They struck a chord with the girls because they were, first of all, didn't look blonde. They had what I call passion for fashion. Their fashions were new. Baggy jeans, baggy cargo pants, sort of the crop tops and things like that. Right. I mean, I guess because Barbie was, you know, sort of the, let's just say the country club doll.

1:01:40And Bratz was like, maybe it was perceived to be more rock and roll, maybe. Right, exactly. So when they found out it's not a fad, they tried to knock it off. They basically tried to make a Bratz knockoff. Yes. And they called it My Scene Barbie. My scene Barbie. Yes. Yes. It didn't work. Then they came up with a line called Flavos. Flavos was like urban looking doll with graffiti packaging, etc. And I did an interview with the Wall Street Journal. You can pull it up. And they told me, what do you think about Flavos? And I told Wall Street Journal, they look like gangster Barbie. the only thing that's missing is the cocaine vial.

1:02:26And she wrote that in the article. Why did you say that? Why did you not have somebody sitting next to you saying, Isaac, shut up. Keep your mouth shut. No, I didn't have. Okay. All right. So you say that. And I'm assuming that pisses Mattel off. Well, I did more than that. Besides the cocaine, Bob Eckert, who was the CEO of Mattel, came from Kraft Foods. and I also started making and selling toys and selling cheese or two different things. And apparently Bob Eckert said, sue that son of a bitch. I'm not surprised. You pissed them off. I did. Why did you poke that bear? I shouldn't have. So they sued you for what?

1:03:12They didn't sue me first. So they sued Carter Bryant first. They sued Carter Bryant, your designer, basically saying, hey, that's our intellectual property. Right, exactly. And then they leaked that lawsuit to Wall Street Journal. And I am walking in to this restaurant, Katana, on Sunset, the Japanese restaurant. My cell phone rings. It's the Wall Street Journal. Hi, Isaac. I want to talk to you about this lawsuit that Mattel just filed. I said, what lawsuit? So this lawsuit they filed against Carter Bryant, saying that he worked at Mattel for two weeks while he was working for you on Bratz. And I called Carter Bryant right there.

1:03:58I said, I was just told about this with Wall Street Journal. Did you work at Mattel two weeks at the same time working on Bratz doll? He said, yes. I got so angry. I said, why the hell did you do that? Because now he gave him a cause to bring this lawsuit. Anyways, that's how the lawsuit started. And we countersued Mattel for copyright infringement with Mycindol. I see. Okay. And we countersued them for theft of trade secret. Because I thought there's a mole in my company, to be honest with you. I thought Mattel had a mole in my company. Okay. Here's what I understand. By 2006, Bratz had about 40 percent of the worldwide toy market in dolls, the number two doll in the U.S.

1:04:49market. Right. Now you begin what will be a protracted battle. There have been articles, books. There have been documentaries about this war between Mattel and MGA. They teach that case in universities. They teach it. I've read some of these case studies. And I've walked away from this just thinking, oh, my God, all the money that lawyers made from this because really that's who made the money. Oh, my God. But Cooney Manuel, the law firm that represented Mattel, made$450 million. It's unbelievable, right? Okay, so this, now you begin what would be a protracted legal battle. But I think at a certain point, a court basically said you had to stop selling the Bratz dolls.

1:05:282008. 2008, okay. They said you cannot sell Bratz dolls while this litigation is happening. So what did that mean? I mean, this is a billion dollar. Yeah, so Mattel asked for an injunction. Worldwide injunction. You got to pull all the brats' toys and products. You had to stop selling brats. So the injunction came literally on a week before Thanksgiving. Which is like the time you've got to start selling for Christmas. Right. So we went to an appellate lawyer, and the appellate lawyer says, we got to file for an emergency appeal. So we filed our appeal and literally died the day before I had to sign the paperwork.

1:06:16To do the recall was the hearing on the Ninth Circuit. Can I just mention one thing? Yeah. Part of the ruling by the previous court was also that you had to pay Mattel$100 million in damages. Yeah, that's exactly. And that Mattel would have the rights to the doll. Yeah, they belong. Everything brass belongs to them. I mean, it was totally a dracoon. I mean, you guys got absolutely hammered in that. Exactly. Everybody thought we were going to go bankrupt. I thought we were going to go bankrupt. To be honest with you, I became, for the first time in my life, suicidal. Wait, wait, stop. That's a serious thing that you just said.

1:06:50I mean, you felt that you were finished? And that you didn't know if you were going to be able to survive? Yeah, exactly. I really felt like that. But Isaac, you're a fighter. You're the guy that said Nintendo and heard no, and you felt like this really, you were going to be defeated. Yeah, it was. I mean, every ruling was coming against us. Did you, Isaac, because I've talked about this on the show before, and certainly times in my life I've been depressed and have had depression and learned to manage it over the course of my life. You don't strike me, and maybe this isn't fair to say, as somebody who dealt with that.

1:07:32But did you or were you? Are you prone to getting depressed? I am. Yes, I have been diagnosed with depression because the way I grew up. I mean, I didn't have a childhood. I worked since I was eight or nine years old. So and I went through a lot of hardship. And yes, I do have depression. And I've tried to manage this with a lot of things. I meditate. I still go to therapy all the time. I'm not ashamed about that. Was it hard for you as a Middle Eastern man coming from a macho culture to acknowledge that? No, for me it wasn't. I mean, people who know me, they say, oh my God, Isaac, at the drop of anything, he starts crying.

1:08:16So I'm not afraid of being in touch with my own internal emotions. But that time with that injunction, I mean, they took me to ER at Cedar Sinai. It kept me overnight. Because you thought you were having a heart attack? Yes. How did you manage? I mean, this is a long period of time and a long period of time under stress. It was like two years while you were fighting this. Ten years. Well, ten years, but the most, the injunction over the court order. Yeah, that was the hardest part. How did you manage through that? Personally for me, because I don't like to quit. I hate quitting. I did not want my children to see that, oh my God, our father is defeated.

1:08:59And in the Persian closely knit environment, I don't want people to see that I'm a failure. And there were days that I was so down, but then I would get energized and I said, I'm not doing anything wrong. So I would go back and fight harder. So let me take you back to the timeline for a moment, Isaac. Back to, I think, 2009, when you're finally going to have your appeal hearing on your lawsuit with Mattel, what happened there? So, you know, when we went to that appeal hearing, literally it was the day after was supposed to be the recall. And during the break, I told Josh Rosencrantz, who was our apparel lawyer, I said, Josh, go ask the judges for a stay.

1:09:53A stay that would enable you to sell the dolls again. A stay the injunction, yes. Yeah. By 4 p.m., I was in the car driving from Pasadena to my office, and Josh called me and says, Isaac, you don't believe it. The court of appeal just issued a stay the injunction. And it was, oh my God. And boy, I, again, as usual, I burst into crying. I screamed. I called my wife, got my whole company, people together. And I told them this. We opened the bottle of champagne. And I said, now let's bring Bratz back and kick Mattel's ass. That was not the end of it because you would go back to court. It's too long and complicated to get into all the details.

1:10:38But eventually you won. Mattel was originally ordered to pay over$300 million in damages. And then it was a long time of fighting against each other. hundreds of millions of dollars in legal fees, hundreds of millions of dollars in damages and in judgments. But I have to assume that you walked away from all those lawsuits down, like in the red. You didn't make any money from them. You actually lost a lot of money, even though there were judgments in your favor. In the end, you actually lost a lot of money. Yes. I mean, guy for six months, I sat in court. I would not come to my office. I hired a guy named John Barber to run my company while I'm in court.

1:11:19You know, one of the things I remember vividly, when the jury verdict came, and of course all the press was there in the courthouse, and my son Cameron, who at the time was 19 years old, the LA Times reporter started asking him, how does it make you feel now that your father has won this long battle? He said to the reporter, yes, my father won this case, but Mattel took away our father from us for the past 10 years. Wow. I still have pain about that lawsuit. I still do. You can tell. I mean, you can hear it. Right. But, I mean, it goes back to my childhood. And coming home bloodied and my mother saying that if you ever come back bloodied, I'm going to hit you.

1:12:15Go back and fight. Don't be bullied. I don't like to be bullied. And I think in general and I tell my kids, if you are right and you believe in something that you're right, you fight to the end. And I will not change that. You know, it's interesting because Mattel had obviously a resurgence last year with Barbie and the Barbie movie. And the Barbie film was so successful. and I imagine it's had an impact on their sales. And clearly, they also have not forgotten, because I'm sure you are aware of it, but there is a scene in the Barbie movie when Barbie goes to high school and the high school girls are kind of like berating her with this brutal honesty.

1:12:59And they are named after the original Bratz dolls. The mean girls are Yasmin, Sasha, Chloe, and Jade. Exactly. So they're taking a dig at you. Yeah, they were. It was funny. You know what? It's a good thing they did that because Bratz is under resurgence and growing again. So on my LinkedIn, I thank them. I thank them for this. All right. So now Bratz is back. But, you know, again, like, you know, these things could be cyclical. And so I have to imagine, because I know that you, in the meantime, were trying to expand. We didn't really get into this, but you actually bought another company. Yeah, Pixel Zoo in Australia.

1:13:38And I bought actually, I bought Zapp, which is a German company. I bought Little Tykes. Little Tykes, which makes like... Cozy Coop. Right. And toys for little kids. But this was, Bratz was still kind of the center of MGA. And I wonder, you had to be thinking like we can't, this can't be the center of our business forever because it might not be a forever toy. Right. So we came with many, many new toys. Yeah, I want to talk about one of them because this is now a huge seller for you called LOL Surprise. This came out in 2016. And basically, it's like a doll that you unbox in layers. And anybody who's got kids knows that many kids for a long time have been obsessed with these unboxing videos of other kids just opening things.

1:14:27Tell me about the genesis of LOL Surprise. How did that come about? So, you know, my kids were saying to me, Dad, do you know what unboxing is? People buy Apple iPhones, go in front of the camera, unbox it, and they get 18 million views. And some of them have YouTube channels like Ryan's World that turn into multi-million dollar businesses. Exactly. Huge. So the next day, I couldn't wait. I came to my office and I went to my head of design. I said, I want to have the ultimate unboxing toy. We had something called Baby Brats. They were so cute. And I said, I want these to be at the center of the ball once people unwrap it.

1:15:17So it's a ball and you would unwrap it. And in different layers, there'd be a little surprise, like stickers or something. But in the middle would be this doll. Right. And it became the biggest toy ever that we have launched, much bigger than Bratz. It's amazing because there's so many elements of this story that were like even the name LOL Surprise, I guess, came from a consultant that you had who said, look, if you do searches in YouTube, you'll see a lot of LOLs or Surprise. And so let's just combine them and call them that because it'll show up in search. Exactly. I mean, the reason why I point this out is because to build something out of nothing oftentimes can be a failure.

1:16:00And you've had, I mean, there have been plenty of, I'm sure, dolls that you've had that just didn't go anywhere. Yeah, like we had a doll line called Novi Stars that everybody in the retail thought is going to be huge. Novi Stars. Right. Okay. And it was based on aliens. And I thought it was going to be the biggest failure we ever had. But why didn't they work? They are kind of weird and creepy, but why didn't they work? Because I thought as an adult they looked good. Retailers thought they looked good. But then after they failed, we went to research, and the kids said they don't like aliens. Period.

1:16:42They get scared of aliens. So what, you just don't know if something is going to work, right? You just don't really know. For every success, there is at least in the toy business, 15 to 100 failures. I call toy business legalized gambling. Because you have to constantly come up with new innovations because kids are fickle, right? They're into something for a short period of time. Yeah, exactly. The key is to be able to listen to them and translate what they're saying. I'm curious today, I mean, it's been reported that the company, you know, at various times does over$5,$6 billion in revenue. Yeah, in retail sales, yes.

1:17:25You're not an upstart. I mean, you are as big, if not bigger, than Mattel. We're not as big as Mattel, but we are the number one privately held toy company in North America. So we're big, but I always think like an upstart, and so does my team. So even though you're still a competitor to Mattel and Hasbro, you still see yourself as an outsider, as like the guy fighting these giants. Absolutely. How long until you, I mean, here you are now, you've become a billionaire. Right. In toys. I mean, when do you feel like you don't have to fight anymore? That's a very, very good question. You know, I told you I go to therapy, and one of the things that my psychologists keep telling me is, Isaac, okay, I know your childhood and you had these issues, tough, hard upbringing, but you're still fighting.

1:18:26You got to change and relax. And unfortunately, I think some ingrained habits is hard to break. And as you get older, it becomes harder. I have tried to get better. I work less. I'm much calmer with my people, with my family, etc. But for good or bad, I still have that fighting instinct in me. You have obviously made a lot of money and done very well. It's privately owned. You're 70. You've got a long life to live. But I wonder what you think about the future of MGA. I mean, at what point do you sort of stop going into the office every day and running the operation? I got to tell you, I still enjoy what I'm doing.

1:19:17I love it. I mean, I just came up with five new toy ideas. I got COVID, so I was home for five days. I came with five new toy ideas while I'm at home. I mean, when you think about the journey you took from where you came from, coming to the US, no connections, very little English, to building now the largest privately owned toy company in North America, one of the largest in the world privately owned and becoming hugely financially successful. How much of that do you attribute to the hard work you put in? And how much do you think has to do with the luck, the fortune that you've met? I don't believe in luck.

1:20:07And I never put my hand in front of anybody for a dollar. So it is the hunger. You need the pride of winning and succeeding. And I have lived the American dream. I could not have done what I've done in any other country. This country has a lot of issues. But if you work hard and you believe in who you are and you're not afraid of failing, you can become successful. There's no other country like it. That's Isaac Larian, founder and CEO of MGA Entertainment. By the way, Isaac's planning to keep the business in the family. He's training his son Jason and his daughter Jasmine to take over MGA once he retires.

1:20:56Jasmine's already built a successful brand of her own. It's a fashion label called Cult Gaia. And random bit of trivia, the co-founder of Sweetgreen, Jonathan Neiman, is Isaac's nephew. And if you scroll back in our podcast queue to 2020, you can hear the story of how they built Sweetgreen. Hey, thanks so much for listening to the show this week. please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. This episode was produced by Alex Chung with music composed by Ramtin Arablui. It was edited by Neva Grant with research assistance and fact checking from Carla Estevez and Cecile Davis-Vasquez.

1:21:36Our engineers were Gilly Moon and Robert Rodriguez. Our production staff also includes JC Howard, Casey Herman, Sam Paulson, Carrie Thompson, John Isabella, Chris Massini, Catherine Seifer, and Malia Agudelo. I'm Guy Raz, and you've been listening to How I Built This. If you like How I Built This, you can listen early and ad-free right now by joining Wondery Plus in the Wondery app or on Apple Podcasts. Prime members can listen ad-free on Amazon Music. Before you go, tell us about yourself by filling out a short survey at wondery.com slash survey.