Podcast Summary: How I Built This with Guy Raz

Episode: Audible: Don Katz
Host: Guy Raz
Guest: Don Katz, Founder of Audible
Date: November 1, 2021

Overview

In this episode, Guy Raz interviews Don Katz, the founder of Audible, to unpack the story behind the rise of the world’s largest audiobook platform. Katz shares his journey from journalist and author to tech entrepreneur, discusses the early challenges of launching Audible amid skepticism and technological limitations, and reflects on the company’s near-collapse during the dot-com bust before its ultimate acquisition by Amazon. The conversation is deeply personal and rich in entrepreneurial insights, including facing doubts, capitalizing on lucky breaks, and revolutionizing how people engage with spoken word content.

Key Discussion Points & Insights

1. Origins & Early Influences

• Upbringing & Family: Katz discusses his Chicago upbringing, strongly influenced by his father, a guitar manufacturer and war hero.
  • [06:44] Don Katz: “My father was just incredibly smart... he was also, he'd been a war hero...”
  • His father’s "You too can play guitar" campaign challenged status quos, influencing Don’s personal philosophy ([07:44]).
• Loss & Resilience: Katz lost his father suddenly at age 47, profoundly shaping his risk tolerance and career ambition ([08:59]).
• Academic Influences: At NYU, Katz was tutored by Ralph Ellison, who inspired his love for the spoken word ([10:22]):
  • “Ralph actually fleshed it out...gave me the confidence to try to be a professional writer.”

2. Writing Career & Transition to Entrepreneurship

• Breaking into Journalism:
  • Katz’s big break came through a chance dinner meeting that led to his first Rolling Stone assignment in Spain ([13:28]).
  • Coming from a non-standard journalism background, Katz felt imposter syndrome but leaned into opportunity ([15:37]).
• Book Writing and 'MBA in Real Time':
  • His writing about major corporations, like Sears, gave him business insights. He viewed storytelling about American institutions as a window into ambition, hubris, and innovation ([20:15], [22:02]).

3. The Genesis of Audible

• Personal Frustration Inspires Innovation:
  • Annoyed by the impracticality of audiobooks on cassette during his runs in Riverside Park, Katz wondered if there was a better way ([23:54]).
• Early Tech Curiosity:
  • Katz, aided by his tech genius friend Ed Lau, explored analog-to-digital compression and saw the potential for audio delivered over phone lines ([25:05]).
  • The concept evolved into a “solid state cassette” and a new business plan promising to “liberate the signal” ([27:39]).
  • Katz's vision: “When your eyes are busy but your mind is free” ([28:26]).
  • Early business plan leveraged transportation statistics—93 million Americans commuted alone—to market the idea ([29:58]).

4. Building a Hardware & Content Startup (Mid-1990s)

• Finding Co-founders and Investors:
  • First funding came from Tim Mott of Electronic Arts, who was energized by Don’s “primitive business plan” ([35:24]).
  • Persuaded a Bell Labs scientist, Guy Story, to join Audible with the lure of equity and a bold vision ([36:55]).
• Audible's First Device:
  • The team, flush with initial investment, worked with design firm IDEO and faced the realities of hardware manufacturing ([38:38], [43:40]).
  • The first Audible player launched in 1997—clunky, expensive, and low audio quality, but used by passionate early adopters ([44:03]).
  • “It sounded like somebody talking to you with a COVID mask in the bottom of a bathtub…” ([45:38]).

5. Dot-Com Boom, Bust, and Survival

• Venture Capital, IPO, and Tragedy:
  • Audible went public in 1999 despite having fewer than 6,000 customers. Robin Williams invested and participated in the roadshow ([49:36], [50:25]).
  • Katz recounts the sudden death of CEO Andy Huffman, catalyzing a survivor mentality among the team ([50:27]).
• Dot-Com Crash:
  • After the bubble burst, Audible's stock dropped from $29 to $0.04 ([03:12],[51:56]).
  • “...there were 1,500 public internet companies at the beginning of 2000 and 140 at the beginning of 2003. But it was that kind of decimation...” ([03:12]).

6. Pivots, Partnerships, and Steve Jobs’ Lifeline

• Strategic Pivot to 'Platform':
  • During the downturn, Audible quietly became the embedded audio platform (“Audible Ready”) for new MP3 players, locking in market share for future recovery ([56:09]).
• Cracking Audio Content Licensing:
  • Katz describes the challenge of convincing traditional book publishers to license audio rights and the breakthrough with subscription models ([58:44], [59:34]).
• Steve Jobs & The iPod Era:
  • In 2001, Katz received a fateful call from Steve Jobs, who was interested in Audible’s bookmarking and syncing technology ([60:51]).
  • Jobs and Katz bonded over the history of storytelling and the promise of technology to enhance it ([61:22]).
  • The iPod partnership let Audible ride the MP3 wave and escape the burdens of hardware manufacturing ([62:44]):
    • “Once we started giving away minis instead of our own player, it started to get better.”

7. The Business Model Breakthrough

• Transition to Audiobooks & Subscription:
  • The company shifted focus to audiobooks and digital licensing, creating a recurring, high-margin subscription model ([64:48], [65:41]).
  • “I would put my wallet on the desks of CEOs in the publishing industry. I said I need more content…” ([65:41]).
  • Audible produced its own content to meet rising demand and experimented with original programming ([65:19]).

8. Exiting Hardware, Growth, and Amazon Acquisition

• Out of Hardware, Into Content:
  • By 2005, Audible turned its first profit, a decade after founding ([67:13]).
• Growth Catalysts:
  • Broadband adoption and e-commerce normalization unlocked scale ([69:02]).
• Move to Newark and Social Impact:
  • Katz moved Audible’s HQ to Newark, NJ, as both a practical and community-minded decision—to foster culture and social change ([72:37], [74:02]).
• Amazon Acquisition:
  • In 2008, Amazon purchased Audible for $300 million ([75:09]), which Katz says enabled them to grow at unprecedented speed and impact.
  • “I was really in a moral crossroads... I knew that if I could hook back in with Jeff and Amazon, we could have access to several hundred million people…” ([76:26]).
• Retention:
  • Katz stayed on as CEO for as long post-acquisition as pre-acquisition, citing Amazon’s unusual commitment to entrepreneurial autonomy ([78:37]).

9. Luck vs. Persistence

• Reflection:
  • Katz believes his journey was about 51% grit and wise decision-making, 49% luck ([80:01]):
    • “Otherwise, how could I have made so many stupid boneheaded decisions along the way that didn’t kill us?”

Notable Quotes

• On starting Audible:
  • “When your eyes are busy but your mind is free, we would create a higher level of purpose...” – Don Katz [28:26]
• On being early to market:
  • “The idea was way ahead of its time and often when that happens businesses don’t make it because they’re too early.” – Guy Raz [43:40]
• On doubt and founder’s imposter syndrome:
  • “Oh my god, I'm a fraud and they're about to find it out...” – Don Katz [15:37]
• On Amazon's acquisition:
  • “If I could hook back in with Jeff and Amazon... we would have that many more millions of people the freedom to even do the things [we're] doing in Newark that was meaningful to me.” – Don Katz [76:26]
• On luck and persistence:
  • “I think it’s something on the order of fifty point five to fifty one percent purposeful good calls and brave moments...the rest of it is definitely luck…” – Don Katz [80:01]

Timestamps for Key Segments

| Topic | Timestamp | |-------------------------------------------|--------------| | Dot-com crash and context | 03:12 | | Family background and father’s influence | 06:44 | | Mentorship by Ralph Ellison | 10:22 | | Early journalism break & impostor syndrome| 13:28-15:37 | | Inspiration for Audible | 23:54-25:05 | | First hardware and business plan | 27:39-29:58 | | Raising funds, quitting writing, new cofounders | 35:24-36:55 | | First hardware launch, flaws, and feedback| 43:40-45:38 | | IPO, loss of CEO, Robin Williams connection| 49:36-50:27 | | Dot-com bust aftermath | 51:56-53:06 | | Audible’s “platform” pivot | 56:09 | | Steve Jobs and iPod partnership | 60:51-62:56 | | Breakthrough to profitability & Amazon deal| 67:13, 75:09 | | Discussion on luck vs. persistence | 80:01 |

Memorable Moments

• Katz explaining his father's habit of leaving him Purple Hearts on his pillow after sports injuries, blending heroism and kindness ([06:44]).
• His “non-toxic midlife crisis” as described by his wife when transitioning from writing to entrepreneurship ([19:21]).
• Audible’s original download: a customer in Cave Creek, Arizona downloaded “Men Are from Mars, Women Are from Venus” – the first ever ([42:52]).
• Steve Jobs calling Katz to collaborate—emphasizing how storytelling history and technology can intersect ([61:22]).
• Katz’s reflection on luck: “...how could I have made so many stupid boneheaded decisions along the way that didn't kill us…” ([80:01]).

Conclusion

Don Katz’s journey in building Audible is a testament to perseverance, vision, and seizing opportunity amid formidable odds. The episode spotlights the evolution from analog frustration to digital dominance, the challenges of being ahead of the market, and the value of both grit and serendipity. For entrepreneurs and storytellers alike, Katz offers a compelling, candid blueprint for turning passion into an iconic brand.