74. David Friend: From Synth Legend to Cloud Storage King

0:00David Friend:Welcome to The Difference Engine, the show for tech founders, investors and innovators.

0:15David Friend:Today's IT industry owes a lot to other areas of human activity. Inspired by the punch cards that control Jacquard textile looms, the father of the computer, mathematician Charles Babbage, worked on the basics of the Difference Engine, after which this podcast is named. And he did it without electricity. Using that power source eventually, the HP company's first products were for the Disney movie Fantasia. And the AI chips we use today as Enterprise IT were originally used to power video games. So it's perhaps no surprise that the world of entertainment and IT cross-pollinate so beautifully. Today's guest is living proof of the link between mathematics, music, and electronics.

0:59David Friend is the man who founded ARP. He sold newfangled synthesizers to notable locals, including David Bowie, George Harrison, Jimmy Page and Pete Townshend. ARP even provided the legendary five-note communication in Close Encounters of the Third Kind and the Star Wars droid R2-D2's voice.

1:25David's music industry days are now behind him, but that does not mean this five-time founder is taking it easy. Oh no. Today, he proudly sits atop and orchestrates Wasabi, the fourth largest data storage company in the world, outscored, or perhaps outstored, only by Amazon, Microsoft, and Google. David Friend, welcome to The Difference Engine.

1:52David Friend:So, David, can you take us back to your younger days at Yale where all of this story started? Sure. Well, I was a double major in music and engineering. I went to college during the Vietnam War and nobody was really thinking about careers at that time. When you got out of college in 1969, like I did, your choices were Vietnam, Canada, or jail. I'll take Canada, please.

2:23so uh but i i so i i had uh would love to have been a professional musician but i didn't have the talent but i so i kept my engineering work going and i had always been a science nerd as a kid and building electronics projects in the basement but i ended up with a bursary job that paid for my gas. And I built the electronic music studio at Yale. So I was designing equipment that the composers were using and that I was using myself for my own avant-garde electronic music. And this eventually led to the founding of the synthesizer company ARP that became such a big deal in the 1970s and are still being sold today in music stores around the world.

3:12David Friend:The early ARPs were not particularly portable machines. They were big and chunky and expensive. But even then, the music industry got to hear about what you were doing and beat a path to your door. And some names that some of our listeners would be very familiar with went and found David Franz. Can you tell us a little bit about that? Back in the early days of synthesizers, and when we entered the market in 1970, another company called Moog had already been in the market. And these things were basically used to create avant-garde music. And in fact, my first customer, when we were five engineers sitting around building the first synthesizer, and we get the first one built, and then we all looked at each other and said, who's going to sell it?

4:03and I was the least unpresentable of the five, so I was elected to do that. And, of course, I went back to Yale, and Yale turned out to be, I think, our first or second customer. After a year or so, rock bands with a lot of resources like The Who and Led Zeppelin and so forth started to appear, and they started using our synthesizers on their recordings. And I remember one of the first things I did to market ARP was take this big 30 ,000 pound synthesizer. I brought it to the Audio Engineering Society meeting in New York City and turn around and there's George Harrison looking over my shoulder asking what the heck is this thing and how do you use it?

4:54That proceeded for a year or so until studios and rock bands became actually a bigger part of our business than university electronic music studios. And that's when I had the sort of the insight where I said, if we can make these things cheap enough and simple enough, they could be sold through retail music stores and every high school rock band would go out and buy them. And that led to the development of the ARP 2600, which was probably the first major synthesizer design specifically for stage use.

5:32David Friend:There was you and the Mini Moog, really, out there on stage. And just about every famous artist you could possibly name started using you or the Moog or both. And music changed forever. And, you know, we had the evolution of the German electronic bands and disco and funk and progressive rock. Everybody was using your machine. So you sort of hit gold by that time. Yeah. And it changed my life because I quickly morphed from being an engineer to being basically a sales guy, which is what a CEO does. You sell your customers, you sell your employees, you sell your investors. And my days during the 1970s largely consisted of going to some recording studio and waiting for some band to show up so I could put an endorsement contract in front of them before the manager showed up.

6:33During the 70s, there was a lot of drugs and money in the rock and roll business. And frequently the band would show up and they'd be too stoned to even see where the signature line was on the contract or or they wouldn't show up at all you know i'd get up at three in the afternoon head off to some recording studio in new york city wait for the band to come in they stagger in at two in the morning or something like that so that but you know we had over a hundred major bands as official arp and dorses by about 1974 i was counting my cd collection

7:07David Friend:the other day and uh and just trying to work out which of the cds had had had arp technology on it and and there was definitely more that had it than didn't um probably probably says a lot about my musical taste but but certainly you've influenced the whole generation and and it's true that even today the arp sound is available on the current generation of synthesizers yeah korg modules right yeah well korg uh came to me i don't know six or seven years ago maybe maybe a little more 10 years ago and said that there was demand for these old ARP synthesizers in the market, that everybody wanted that old analog synthesizer sound.

7:46Yeah, nice. And they wanted to re-release all these old ARPs. And they asked me if I would consult on that project to help them with some of the technical details. And, you know, they've re-released the 2600 and the ARP Odyssey. And they're selling better today than they did in the 70s. How validating, man. Man, that's just brilliant. I love it. It's like you've created like the Les Paul of synthesizers there, David. You've described yourself, and I love this because Jono and I started all, I spent a lot of time in PR. So you describe yourself as a one-man publicity machine, which again is part of your role as a conductor and orchestrator of several companies at this point.

8:28And you mentioned how you sort of just getting featured in magazines and the endorsements really uh helps getting yourself known is always the biggest problem and um i would write columns for uh magazines in the music industry and there was a magazine called keyboard i don't know if it still exists but it was a magazine dedicated to keyboard players and you know i raised my hand and said how'd you like to have a monthly column on synthesizers and uh and then you know i just you just show up places where people who influence the music industry are going to be. And so it was hard on my family because you're away a lot.

9:13You spend your days hanging out at a recording session or something of that nature. But you do what you have to do. And I don't view it as pulling the wool over anybody's eyes. I mean, the thing that always got me going and still gets me going is the fact that I really love the idea of being a composer and starting a company. It's like you take a blank sheet of paper, you start filling in the notes, and after a while, you have a composition. And I get that same sense of satisfaction from starting companies. And Wasabi, see on my shirt here, is number six for me since getting out of college.

9:55David Friend:One of the things, you know, you talk about orchestration and, you know, being the least un-presentable one of the crews. So you basically ended up running the firm, you know, this one-man publicity machine, getting that stuff sold. And there came a point where you thought maybe we should get some external investment in this. Well, the challenge in ARP was, you know, finding bands to endorse your products before they got so famous that, you know, you couldn't afford to get their endorsements anymore. And so, you know, I would sit there poring over record sales and airplay statistics and things like that.

10:34And when the Apple II computer came along, I taught myself how to program. And I designed a program for the Apple II computer called Trendspotter. And basically, you know, I had my assistant filling all this data, and then it allowed me to use data visualization to figure out, you know, who was likely to be, you know, the next band that people were going to be listening to. And one day I had a venture capitalist in my office to try to raise some money for ARP. and he wasn't interested in that, but he was very interested in this piece of software that I had developed for the Apple II computer because at that time, there weren't very many CEOs around who had a PC on their desk.

11:19And I showed him what I could do. I showed him how I could compare record sales for 100 top bands in California versus 100 top bands in New York City and that sort of thing. And he said, look, why don't you get out of this synthesizer business and I'll give you a million dollars to seed a company to commercialize that software and you know i dismissed it at first but the long story short is uh six months later we sold our to cbs musical instruments and uh and i launched a company called computer pictures with that guy's uh million dollars i have to say that is what bcs you know historically allegedly think that they do like They see something that other people don't.

12:03You don't hear stories like that very often. You don't hear them much anymore, I have to say. So that was the beginning of my software career. I've been there ever since and thankful for it, in fact, because the music industry was fun when I was in my 20s, but I certainly wouldn't want to be doing it today.

12:22David Friend:So there you were. Data visualization became your thing, and that was the new thread in your career. Can you talk us through the next couple of companies that were essentially based on this expertise in data visualization? The first company, Computer Pictures, got bought by a larger software company less than two years after we founded it. And that was the first time we were able to put some money in our pockets. and then we, and I mean me and my longtime technical genius co-founder Jeff Flowers, we founded a company called Pilot Software, which developed the same basic kind of software, but designed for larger companies with much larger data sets.

13:09So that company sold to Burger King and JCPenney and big chains of department stores. And, you know, mostly companies that had multiple outlets where they were trying to use data visualization to figure out which stores were underperforming and why they were underperforming. And that company was very successful. It grew and then we sold it about eight or nine years later to Dun & Bradstreet.

13:36David Friend:They use it to crunch their AC Nelson data. I mean, it was a very interesting acquisition. They had a particular application they wanted to use it for. Exactly. So, you know, the same thing where they have, you know, hundreds of or thousands of television outlets around the country all doing advertising. And that was the third company. At this point, the music's almost a distant memory. You're pretty much all in on data. And a couple of the threads there, like a technical co-founder, this is all the classic advice that people get when they start up these days. But I guess you're just doing it on the fly.

14:10You were like into data super early before anybody else, right? Before everyone else woke up to it. Well, as a CEO, you realize very quickly how much your business depends on having data. And, you know, so I got, when I was running ARP, I just got very frustrated with, you know, having to sit there with pages of paper and, you know, trying to take numbers off of a, you know, a magazine and put them on a graph paper or something like that. I mean, it was just unbelievably tedious. that's what sort of led me to develop this software myself when I saw this Apple computer I said wow this has got graphics capability you know this is just what I need but you also moved it onto the

14:48David Friend:PC because you'd realized that the PC was going to be the corporate standard I guess by that time and then I also realized you know back in 1980 well I forget what it was now the date but we we were one pilot software was one of the very first so-called client server applications where the data resided on a mainframe, but all of the presentation of the data was done on a PC that was talking to the mainframe. So, you know, most of the, at that time, people had mainframes and they had dumb terminals. And, you know, we unplugged the dumb terminal and plugged in the PC and said, you know, now we can do a lot more at the desktop.

15:27David Friend:You've never been afraid of getting out there on the road. And we saw that in art, but you were doing it with pilots as well. And you used to basically ask the prospects to give you a chunk of their data under MDA, and then you'd show them what you could do with it? Frequently, people were very surprised with what they would see in their own data. So if we were going to go out and do a sales pitch, we'd ask the company to give us a sample data set that we could then look at. We were actually at the offices of Alitalia, the Italian airline. And we had all the senior execs in the conference room, including the CEO.

16:05And I get started with my presentation and putting up showing how Alitalia's performance was going in various markets and cost structures and things like that. And the executives start arguing among them, pointing at the screen and arguing among themselves about the data in Italian, which I didn't understand. And the argument got more and more heated with more and more gesticulation. And finally, they all get up from the table and they march out of the room yelling at each other, going down the corridor. I could hear them, you know, the yelling disappearing. And we're sitting there in the conference room all by ourselves.

16:45Wow. Finally, we just packed up and left. Wow.

16:49David Friend:Perhaps it was better in the end that you did give that cup near way to Dun & Bradstreet. But we often wonder when we're talking to great serial entrepreneurs like yourself, where do you get your ideas from? And I think your next company came from an insight you got by having a daughter who perhaps wasn't doing what she should have been doing with her computer. Well, this was the early days of the Internet. And at that time, you know, everybody had laptops and PCs and they were typically backing them up. If they did back them up at all, they were typically backing them up by buying backup software like Symantec or others, McAfee, and backing them up to an external hard drive.

17:40And, you know, truth of the matter is, that's what I did. But, you know, I didn't do it every day. In fact, I didn't do it very often at all. Neither did my daughter, apparently. She was in college in New York, and she calls me up one day and says, Dad, the hard drive in my computer crashed, and I have a term paper that I've been working on all semester, and it's due on Friday. So I get in the car. I drive down to New York City. We take the hard drive out and bring it over to one of these labs that supposedly can recover data from dead hard drives. And they charged me$1 ,300, and they couldn't get the data back.

18:18and and then so i get back to boston and i'm having lunch with my with my uh founder uh partner jeff flowers and he said yeah he said my somebody just broke into my wife's car and stole her laptop and she lost two years of baby pictures that uh she hadn't backed up and and then we sat there and looked at each other and just says you know everybody's sitting here connected to the internet that why can't everything you're doing on your PC just sort of float up to the cloud in the background without having to do anything? You know, when you're connected to the internet, it's just working in the background.

18:56You never have to think about it again until something happens to your computer. And that was the beginning of Carbonite, which became the largest endpoint backup product in the U.S. And it was the first backup product to integrate the data storage with the software on the PC. So we had to build enough storage in the background to back up 2 million or 3 million PCs every night. So it was a massive amount of data. And we had a big data center where we stored all these backups, all this information.

19:36David Friend:The weird thing about that is that so often in innovation, the thing which stimulates more innovation isn't the thing you would think it was. So you came up with this great application. You had a big title addressable market. It was a clear problem to be solved. But you're tinkering in the background on storage. Yeah, so we got very good at storage because the consumer market is very competitive and you always have to be low cost and high performance. You don't want your phone ringing with customer calls and customer complaints because when you're only charging$50 a year or something like that for a subscription, one phone call to customer support eats up the entire profit from that customer.

20:24One day, Jeff comes to me while I was still CEO of Carbonite, and he said he and our chief architect had an idea for a new storage architecture that if they could make it work, would be much cheaper and much higher performance than what Amazon and Microsoft and Google had introduced with their cloud services. So I said, yeah, you know, go see if you can make it work. and they basically camped out at Jeff's house north of Boston in Marblehead for a year. And finally, they came back and said, it's working. We've got it working and we think this can scale up to exabytes. And I looked at the numbers and I said, holy cow, Jeff, we could sell cloud storage that's a quarter of the price of Amazon's and it's faster and we can still make good margins.

21:19And when I thought of that, then I thought about how big is the storage market? You know, what's the potential for this? I just said, whoa. And so I recruited a new CEO for Carbonite and left to found Wasabi with Jeff. Well, that's so interesting because like, you know, like we've skipped across there seamlessly because you're just looking at the numbers. Three alleged categories. You know, you've got the backup category. That was a thing. then you've got the online storage and now we're talking about cloud storage it's it's as if the ideas that you have like float across existing categories and that's i guess that's sort of the way your mind works right one thing leads to another but it's also i i still always you know if you look at sort of what i do as opposed to necessarily what i say uh what what i do is i'm always looking for that blank sheet of paper where I can start filling in the notes.

22:13And, you know, as I'm good as a CEO, at this point in my career, I've made all the mistakes. And, you know, everything looks familiar to me now. But what I still love, what still makes me gets me excited and cranked up is something new, you know, putting together, oh, here's this technology over here. Here's a user need over here. Let's put the two things together and create a market. And, you know, so that's kind of what gets me going.

22:43David Friend:So here you are, you're in fourth place in terms of the amount of data storage providers behind the obvious big three. But you've come into the market at a time when the nature of what is being stored and why it's being stored has changed. And can you talk us through that and how that has affected how you think about what it is you provide? You know, what's happened in the last couple of years is AI has reared its head as one of the biggest, if not the biggest, consumer of storage. We've noticed. Yeah, really. And because when we started, most of the data that people were sending us were backups.

23:24So, you know, it was that sort of logical step from Carbonite, my old company. And then, you know, kind of out of the blue, a couple of years ago, people started showing up with data lakes. And we'd ask them, well, what is all this data? Well, this is 14 million hours of video that we're using to train an AI to, you know, recognize cars or logos or whatever, you know. And then, so that's kind of like taken over a big part of our business. And what we realized pretty quickly was that the AI industry requires some different kinds of storage from what we were offering. We love this idea of a sort of a one-size-fits-all storage, which is what we had been marketing up to last year.

24:18But we recognized that there was a need for faster storage that was more expensive and also slower storage that was much cheaper. So we introduced, late last year, we introduced our first all-flash-based storage region in San Jose, aimed specifically at the AI industry. and it works exactly the same as our regular Wasabi storage, but it's much, much faster. Is that because of the difference between training and inference stages of the AI? Yes, exactly. And also as a cache for when you're doing training. So if you're going to train a model, you move a chunk of data out of a slower tier of storage into faster storage because you don't want those expensive NVIDIA chips sitting idle while they're waiting for data to be read out of memory.

25:15So it's both those use cases. But then there's also, okay, I've got all this old data. A lot of it is 10 years old, but I still might need it again to train a model. We need to put that somewhere. It's the cheapest kind of storage. Safe, but the cheapest. I want it, but not right away. I'm not willing to pay to keep it. you know, milliseconds away from a response standpoint. So you'll be seeing from Wasabi fairly soon an announcement of a new tier of storage, which will be much less expensive and competing with Amazon Glacier. The people you play with always seem to change, right? So you were obviously dealing with the guys rolling at two o 'clock in the morning, maybe with leather trousers, and now you've got Jensen and his leather jacket that you need to play nice with.

26:04It must be fascinating, all of these different types of folks that you constantly have to, I guess, the industry term for it is partner with these days. We have hundreds of partnerships, and partnerships are where it's at in our business. Because, you know, I'm not able to predict who the winners are going to be in the AI industry, but we're selling the picks and shovels to the industry. No matter what you're doing with AI, you still need data. And people say, well, isn't that a boring business to be in, storage? storage and and i'm like yeah it i love boring i love it because it's it's predictable it's a real business and i don't care who wins in the ai industry if i can sell storage to all of them you know what difference does it make to me and so at this stage in my career you know um i i'm very happy to be at that foundational level, selling to everybody who's really trying to figure it out at the top end.