In this premier episode of the Infectious Talk podcast, Paul talks with long-time friend Dick Costolo, COO of Twitter.
Costolo describes himself as "kind of a slacker kid," whose first ambitions were centered around stand-up comedy and improvisation, not entrepreneurship. However, after a stint with Andersen Consulting, Costolo has been involved with several start-ups, including Burning Door Networked Media, Spyonit.com and Feedburner, which was acquired by Google in 2007.
Podcast Interview
Paul Kedrosky ~ Dick Costolo
Welcome to Infectious Talk at the Kauffman Foundation and Paul Kedrosky. This is a regular podcast where we talk to guests about growth, innovation and entrepreneurship. You can subscribe to this podcast, catch up on past episodes and find related links at our site, www.infectioustalk.com.
Kedrosky: I have with me today, telephonically speaking, Dick Costolo, the CEO of Twitter and previously a cofounder of FeedBurner, which was sold to some company called Google. Say hello, Dick.
Costolo: Hello, Dick. That's a Laugh In ...
Kedrosky: That's great.
Costolo: That's a Laugh In joke. No one will remember that.
Kedrosky: Just you and me, and we can just treasure it.
Costolo: Yeah, you and me and four other people. Yeah.
Kedrosky: So before ...
Costolo: I like the line "telephonically speaking" by the way that you threw out there.
Kedrosky: The problem with being ironous on the phone is we get into infinite levels of regress.
Costolo: Yeah.
Kedrosky: Yeah. So before getting into this, remind me, how do we know each other?
Costolo: (Laughter) I don't actually remember how we know each other to be perfectly ...
Kedrosky: Yeah, see, I was ...
Costolo: ... it's a mystery.
Kedrosky: Yeah, that's what I was thinking about this morning. It sort of, it worried me a little bit that I had no idea because I was going to start into that and then I realized I didn't have an answer.
Costolo: It's like, it's like [inaudible] reproduction in biology. It's just at one point we were friends and then I don't remember [inaudible] and there's no, and there's no specific spot at which we became friends. Yeah.
Kedrosky: Yeah, I don't know. It's worrisome. I don't know what that means. So let's talk a little bit, let's go backwards and then go forward. So just talk a little bit about yourself first. Brothers, sisters, parents. I'm assuming you had at least one of those.
Costolo: No, one of each. So I have parents obviously and then I grew up in Detroit, Michigan – well, outside of Detroit, but people who were from outside of Detroit just said they grew up in Detroit because it sounds kind of cool. I have a younger brother and a younger sister. My younger brother is in Chicago and my younger sister is still in Detroit. And I was basically there my whole life. We didn't travel too much. We never traveled outside the United States and I went to the University of Michigan for school so I stayed close to home. And then I moved to Chicago after I graduated.
Kedrosky: What did your parents do? What do they do?
Costolo: Dad was one, well he's retired now. My dad was a computer science guy. He worked for Pontiac, like just about everyone else in Detroit worked for the auto industry. But he worked in their – which back in the day was called data processing department. So he was a computer science guy which is how I got into it.
Kedrosky: As a kid growing ...
Costolo: My mother was ...
Kedrosky: Go ahead.
Costolo: ... my mom was, had studied to be a nurse and was a nurse but only for a brief period and then just hung out at home. [Inaudible].
Kedrosky: Yeah, as a kid growing up ...
Costolo: ... hung out being the wrong word. Worked very hard at home.
Kedrosky: Worked very hard at home. That's how my mother thought all the time.
Costolo: Yeah.
Kedrosky: So, so tell me, so what, what did you think about sort of what your dad did? Did it sound interesting? Did it sound, I don't know, something that you wanted to do or was it ...
Costolo: [Inaudible] ... no, it was a black box to me. It was just this kind of like, he went away in the morning and he came home at night and it was just I didn't really have any idea of what went on. But when I was, I don't know, when I was however old I was, teenager I guess, my dad got one of those first, Radio Shack was the – I'm really dating myself – but Radio Shack made these computers that were like, you know, 16K memory, you know, and you know, so I started using that and programming on that and picked up I think it was BASIC on that. And started – it was kind of cool. You could program these simple games and then, so I studied – I pretty much knew when I went to Michigan right away that I was going to study computer science. And I did, and majored in computer science there.
Kedrosky: What were you like sort of as a kid? Lemonade stands, corner improv, manage [inaudible]?
Costolo: No, no, I was – I was kind of one, kind of a slacker kid. I really was. I was, I was kind of a – I didn't, you know – I played sports, but just baseball, played basketball in junior high and, but not hard core. You know, I was just kind of like, "Well, I'll play basketball in junior high and I'll play baseball and so forth." But I only played like one sport a year and finally started working and started working in high school. But just kind of odd random jobs. I never had any like, I don't know, entrepreneurial drive or any of that stuff in junior high or high school. And I wasn't particularly – this is, I'm amusing myself here. I'm going to say, this is, people who know me from way back when I was doing improvisation in Chicago will appreciate this more. But I don't think people really saw me until like really like very late in high school, my senior year in high school. And suddenly I'm like, wow, people think I'm kind of funny. I should, maybe I should do that. And so I did a lot of stand up at the University of Michigan too. They would have, you know, the student union would have these like Wednesday night or Friday night, where they'd bring in some famous comedian and students would do stand up so I did stand up there. I was the only person in both the computer science department and doing comedy to this day probably.
Kedrosky: And so it's a good mix, you know. There's some kind of competency match there. So were ...
Costolo: It's a rare mix.
Kedrosky: Yeah, yeah. So I actually did a tiny bit of research for this. I saw something where it said here you did, you know, I knew you had done improv in the 90s, but I actually went back and looked. There was something called, and I liked the name of it, there was something you did called "A Huge, Horrible Failure."
Costolo: Yes. The show was the Annoyance ... I did about five shows – no, maybe more than that. I did about six shows at the Annoyance Theater, which was kind of a [inaudible] glimpse from Sex and the City in Chicago that became famous by doing a real live Brady Bunch. They just basically took an episode of The Brady Bunch and did it live on stage and it turns out when you look at these early 70s TV shows performed now on stage, they're funny, even if it's word for word. So that's how they kind of made their name. But I did six or seven shows there, one of which was "A Huge, Horrible Failure" about an [inaudible] industry, if you will, who is a huge, horrible failure. Did a couple of, yeah, did a – I did mostly two person shows there and then I did one really long one, an improv show there, that was really picked up and toured around the world. We performed at the Edinburgh French Festival for a few years, and Australia and Singapore. We were at the Montreal Comedy Festival, the Just For Laughs Festival which you, a Canadian, are probably familiar with.
Kedrosky: Intimately.
Costolo: And [inaudible]. Intimately. Most people probably don't know about Just For Laughs, but it's really kind of the biggest comedy festival in the world. The Aspen Comedy Festival is modeled after it. And when we did that show there, the show was called, probably my favorite performing thing I ever did, it was called, "Modern Problems in Science." And the kind of a boring title. But the idea was, there were three of us, we just came out on stage and said, "We want a suggestion for an absurd scientific hypothesis." Like, the earth is flat is one we would you know throw out there right away so that people wouldn't suggest it because it's, otherwise, the thing all the people would suggest. Like, you know, the earth is flat or there will be only four, only four atomic particles. So someone would shout something out, you know, like people named Jennifer don't exist, don't really exist, right? Or whatever.
Kedrosky: It's actually, that's actually true though as I understand it.
Costolo: [Inaudible]. And then you would pick who gets, each for an academic discipline. You know, I'm a professor of what? You know, someone would shout out psychology and the next person would shout out Russian Literature and then people would realize by the time we got to the third person that we should really try to give them something really hard. Right? So one of the other guys and I would switch off going last because that was always the fun one. You would get, you know, you would get whatever the crazy, you know, Eskimo physics or Eskimo Literature, whatever. And so then you would proceed over the course of one hour without taking any more suggestions or whatever to prove the scientific hypothesis from the standpoint of those three academic disciplines.
Kedrosky: So now I love that stuff. But I don't know, I'm a junkie.
Costolo: [Inaudible]. I mean, here's ...
Kedrosky: Oh hey. You know, you and I and three others apparently. But do you miss doing that stuff? Do you miss doing that stuff?
Costolo: No, I don't miss doing it because I don't feel like doing it when I'm on stage or on TV talking about whatever I'm doing now. You know, someone asked me before I did all of our [inaudible], you know, "Hey, did you practice your presentation for promoted tweets?" And I kind of, you know, I kind of laugh and said, this is like, this is just stuff I feel like I can run out there and do. You know, so I kind of still feel like I do it now whenever I'm talking to a large group or doing one of these interviews. So I don't miss it at all even.
Kedrosky: But turn it around though. I mean, you know, there's this kind of obvious metaphor people make where, you know, entrepreneurial stuff is all improv anyway. But I often wonder, and that's a little bit I think two paths. So I just thought, maybe flip it around. I often think, and I'm guilty of this all the time, that when you get the sense that you're really good at improv whether it's on live media or anything else, you become I think, you know, over convinced that you can kind of just improv your way out of anything and it can be an excuse for being a little less prepared. Do you find in some ways it can work in the opposite direction for you?
Costolo: I've never had that feeling. I don't think it serves me. I think, I don't think I've ever felt like, "Oh, I've screwed that up because I wasn't prepared enough because I thought I could just improvise my way around it." So I have, I just haven't had that sense. You know, sure, you've got to know the answers to the questions and be smart about what you're talking about. I think that people can see through, just as they can see when you're improvising period. You know, one of the things that our improvise, improvisation instructors would always say is, you know, be as smart as you are, which, by which they meant, by which they meant, like, don't play stupid or don't try to, you know, stupid your way out of the thing by being funny. And I think that's the thing that's true for this business stuff. I mean, if you try to just make up an answer that you don't know the answer to, that's the wrong way to do it. But there are ways to be humorous about the fact that you don't know the answer when you admit that you don't know the answer, right? So I think that as long as you don't just try to fool your way out of it, I think that's different from improvising your way through a conversation.
Kedrosky: No, no fair enough. Okay, it's just me then. Good. Thanks for pointing that out.
Costolo: It's just you. Yeah.
Kedrosky: Yeah. Appreciate that. So ...
Costolo: It's just you. It's not only is it just you, it's specifically and usually you.
Kedrosky: Well, that's been the story of my life, so I just am glad to get that reinforcement. So hey, let's flip forward and talk about this FeedBurner thing, and, as sort of the transition to FeedBurner and then on to Twitter. And so my understanding is you stole the whole idea from Eric Lund and then grandstanded. But I could have it wrong, so you know, just straighten me out.
Costolo: FeedBurner was his idea. Eric Lund was my cofounder at FeedBurner and it was his idea. He basically saw in 2003 that book content started moving all over the place. It's not just living on the place that produced it. And there's going to be more and more of a need to have a sort of a clearing house for publishers where they could go and say, "Hey, I want someone else to handle the distribution of all the content that's going in 90,000 places and I can't track it any more. And I need someone else to track it. And we should do that, and the first thing we'll do is provide analytics on that because once we provide all the analytics around that people will see, oh my gosh, my content is going way less places than I thought it was, and look at this. And then we can turn around and say to those publishers, "Hey, you know, if you were monetizing that with ads, you'd be able to make a lot of money and it would [inaudible] you're not getting on your site any more." And that was the [inaudible] and for all intents and purposes he was absolutely right. And then over the course of four years, we built that, built that platform and had a couple million publishers using it. But maybe a million publishers using it when we sold it to Google and up to two million [inaudible] and that was that. I mean, it was – it was everything he kind of predicted would happen happened and we built it out according to that banana and it worked.
Kedrosky: So flip it around. What were some of the things that you thought you guys, you know, in retrospect, kind of really messed up and learned from?
Costolo: Yeah. So a bunch of things. I would say, I would say, one, is we were hyperreactive in the early days to feedback from early adopters and that caused us sometimes to miss the, you know, the forest for the trees. Like, the early adopters want lots of things that 99 percent of the rest of the players that we care about, you know, were kind of offensive to them and not offensive enough to, look, that's not going to matter to, you know, Disney or Reuters or whoever. But it just so happened to matter to these, you know, these four people who were using our platform from day one who were, you know, checked their stats every four seconds and blogged. You know, had this one blog and maybe [inaudible]. So that was one mistake. We were hyperresponsive to those people which caused us to not – and hyperresponsive to the people who were calling us and [inaudible] with these specific complaints or thoughts or "you need to do this," and not as thoughtful about, hey, those people are not our users. Right? They're 11 percent of our users and they just happened to be the ones that e-mailed us. So we fixed that I think in year two or year three and just meant a lot of wasted energy and a lot of time spent on stuff that nobody really, you know, nobody but those four people ended up using.
I think the second thing that we would, we would do, we would have done differently is we started, we started to really expand into [inaudible] analytics with, we bought a [inaudible] company because we thought, well, we should – you know, if we're dealing with distribution, we should also do web analytics so we could be a one stop shop for people. And I think that just ended up being, you know, we bought a small company, BlogBeat and, you know, integrated that and it was just, it was just not the right way of thinking about it. We had had a good, we had a good mix carved out. And also, there was a real opportunity to just be a real path around distribution and e-mail distribution and content distribution in general and then monitoring that on site was just completely [inaudible] for that. And it was the wrong way of thinking about expanding the business. So I wouldn't [inaudible] – if I had it to do it over again, I wouldn't have bought that company or headed in that direction.
Kedrosky: Is that stuff that you had to figure out on your own or were there people on your board or elsewhere that if you'd sort of asked the right question, you would have got the right helpful answer?
Costolo: People on the board and elsewhere that were helping us out with that stuff. So they actually added some [inaudible] but [inaudible] who you know was great and super [inaudible] and you call them any time and, you know, [inaudible] to the phone 24/7. And then toward the end Fred Wilson. Fred was actually user number 14 of [inaudible] service or something crazy like that. That wouldn't have happened because when we first pitched him, he hadn't had his, he didn't have his first Union Square [inaudible] yet and then ended up getting it at the end.
Kedrosky: So take us to the end of the story. What made you decide when you did that this was the right time to sell, other than someone offered you more money for it than you were willing to risk staving off?
Costolo: Well, this is going to sound, this is going to sound particularly stupid in light of the fact that I kept most my money in the stock market. But [inaudible] getting weary like, wow, things are really like getting crazy. We had had a bunch of offers and then at this, and we had said no. So we had had acquisition offers, I think we started working on the product in '03. We had acquisition offers in '04 and '05 and '06 and we had turned them all down. You know, we turned down the ones in '04, turned them down in '05 and in '06. And then it was '07, it really, you know, end of '06, sorry – end of '06 and then in '07 we sold it in June of '07 when the deal closed. It just was really like, wow, this is, you know, crazy. And we were getting ready to do a financing and realizing that the financing was at lower numbers than the acquisition was. Right? We just decided, you know, we gave people, we went to our board and a couple of them were against selling. "Now's not the time to sell," you know, "Go, go, go. You guys own the market." And you know, my comment to them was, [inaudible] actually I said [inaudible], was, you know, "Look at the number the acquisition offers are coming in at and you guys don't want to finance that. So if you're not a buyer, you're a seller, right?" And they kind of all seemed to, they were like, "Okay, well fair enough. We don't want to finance there and so we need to go do this." And then, you know, like an idiot, we didn't have the foresight to say that was the time to do it because things looked like they were getting too crazy, you know. Didn't do anything about my own personal portfolio and watched it, watched it fall off the mountain.
Kedrosky: Which meant you had to go back to work, which sort of turns into this Twitter thing. What Twitter user are you, do you know?
Costolo: I had to do that a couple of time. No, I had to do that a couple of times actually. One of the things you didn't ask about was we sold, Eric and I and Steve and Matt, the four cofounders of FeedBurner were also the four cofounders of a previous company called SpyOnUs that [inaudible].
Kedrosky: That's right, I forgot about that. That's right.
Costolo: We sold, we sold SpyOnUs, in fact, on September 12, 2000, we sold SpyOnUs for $63 million. And I tell you that number only because, and the date, only because it was mostly stock and the stock came with a 144B one year one year lock up, you know, one year restriction. So that meant the stock restriction got lifted the day after 9/11. You know, and as you remember the markets weren't open that day and were only open for the next [inaudible] and when they did reopen, what was already a pretty hammered stock at that point from the bubble burst thing was wireless financial services companies tripping over a precipitous drop. So it was pretty crazy. My birthday is September 10 and I was out with my wife toasting that life September 10, 2001, like, two more days and we get to style and then the next day was 9/11. And you know, you can't exactly walk around town going, you know, "You think that's bad, guess what happened to me." You know, I declined to have that conversation or even think – I didn't even really – you know, I remember all of us weren't even thinking about it at that point. You know, because everything was so much bigger than that. But then you know, kind of a couple of months later, when all the shock of the 9/11 stuff was starting to wear off, it kind of struck us that, you know, wow, we really, that's really, you know, that was really also personally bad from our own – so I had to go back to work to do FeedBurner and I've had to go back to work here again.
Kedrosky: I need to find some kind of Dick Costolo market indicator that I can at least short it now and then.
Costolo: Yeah, that's exactly right. When I, when I sell a company, that's the time to go get cash and [inaudible].
Kedrosky: So let's talk Twitter briefly here in the time we have left. So what did I ask you, I sort of asked you this earlier, but what Twitter user are you, do you know? ID number.
Costolo: I'm sure you know – oh, I don't know. I don't know. I'm early, I mean, I was definitely part of the service when it was TWTTR, before you know – I, I was on it before there were vowels.
Kedrosky: Back in the day.
Costolo: Yeah, I don't know where – I don't know how long that was though. I remember, you know, having the guys, [inaudible] having the guys giving a bid, Jack and Jason [inaudible], for a long time. And so they called me and they say, "We're doing a thing, check it out." And you know, I had the reaction that a lot of people do when first use it which is, like, this is completely idiotic. Right? I mean, I know I'm at the office because I'm at the office and why would I write that here? And then, you know, there's one of those weird things where, you know, a couple of months go by, you kind of go back to play, you know, that you follow some other people and then I have one of those kind of obvious Twitter moments where I was just starting to play now with it and I learn that it's got stuff all over it. And I learned it in New York. And I know where I was. I land in New York and I said, you know, "I just landed at JFK, coming into Manhattan," and made some little joke about Manhattan. I got up, you know, and got an e-mail from someone that like lives out here, he's like, "Let's go to [inaudible] in Manhattan," that I didn't know was going to be there, and that's when I kind of realized, "Oh, that was interesting," because I would never get something by e-mail saying, "Hey, I'm in Manhattan." But when I was able to blogcast it, I mean, people who were following me saw it, I ended up having a very different connection with somebody that I didn't know was also in Manhattan and we went out for drinks and did, you know, [inaudible] work. So that's when it kind of started clicking for me and then, you know, it goes from there. And then when Fred, when Fred Wilson at Union Square Ventures did the first round, nobody [inaudible]. When Fred did the first round, I jumped in on that when he offered me the opportunity.
Kedrosky: So as a, just a couple more quick things. So as a non-founder, I guess this is the first time you coming in as a non-founder in an early stage company, what was that like?
Costolo: Yeah, it's hard. You know, Evan and I have an outstanding relationship here. I like being the boss. You know, so [inaudible].
Kedrosky: He's not in the room, is he?
Costolo: No, but we've had this conversation. You know, I mean, it's hard to go from being CEO to CEO to CEO to, you know, not being the boss. In fact, one of the reasons I ended up leaving Google after a couple of years was – I think I told [inaudible] like when I left – you know, I just like being the boss. And so, you know, I'm close, but not [inaudible]. And you know, so we have our discussions and so forth and we agree a lot and we disagree a lot. I think a good thing about it is we have no qualms about, you know, just openly disagreeing in front of people, right? I mean, we don't have, none of us have the [inaudible], hey don't ever, you know, don't ever let anybody see that we disagreed. Like, we just openly disagree with each other in big meetings and, you know, have conversations back and forth. So I think it's totally healthy and I would imagine once in awhile some [inaudible] people might interpret that as, you know, "Oh my God, your management team is in disarray." We just view it as good, you know, normal conversation.
Kedrosky: Sort of last question I guess. What do you, looking back over Twitter, looking back over FeedBurner, you're looking back on SpyOnUs, what do you, I mean, other than being in charge – maybe that's the only answer. I mean, just sort of having control of your destiny. What is it you like most about early stage companies?
Costolo: The thing I like most about early stage companies is everything is possible. You know, when you're in a – like, Google is a 20,000 person company right now, I think it is, maybe even more – once you get over, I don't know what the number is, but you get to a certain point where ... again, my FeedBurner cofounder Eric Lund describes it as, you start off on day one and you got this idea for the thing and it can be all of that stuff that you conceive of. It's just going to be all of those things, it's going be this amazing platform and we'll be able to do, you know, you can tip it in this direction or this direction and if that happens, we'll be able to [inaudible] the market. And then you go along, and as you go along, you start to get barnacles on you. And this is true of every company on the planet. Like, you just start to attract new barnacles. And you're running and you're running and then pretty soon, it takes, you know, you run forward and oh there's a barnacle under your knee so you can't really close your knee and leap forward and you kind of have to jog forward and they collapse. You know, and the bureaucracy builds up and, well, remember you've got to go learn the lesson. You know, that's why we hired the policy team because that one advertiser did that bad thing, so now you've got to clear all the new ads with the policy. And it just starts to get to be, "My God, I can't do anything."
And so the great thing about early stage companies is you can get a lot done in a short period of time with few people. And one of the things I really try to do as an executive and just a leader of a company is always look for where those barnacles are starting to try to build themselves up and prevent them from getting into the system. Like it's always easier to say, "Well, it would be great if we had a," you know, and I'll keep on policy stuff. But, "boy it would be great if we had an ad policy team that could just be over here and would do these things and it would be centralized." And like, I hear stuff like that and I think those who come up with a simple trademark policy and some other really lightweight stuff and do it ourselves for as long as we can. You know, within one little ad operation. Because once you get more teams, those teams have to have their own policies and then those have to meet with the other teams and it all builds up. And one of the things I try to do is look for those bureaucracies building up and try to prevent them from happening if at all possible.
Kedrosky: That's a great note to end on. So I mean, congratulations on all your success, Dick, and thanks for, thanks for doing this. I appreciate it.
Costolo: Of course. Happy to do it. I'll talk to you soon, Paul.
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