E1113 20VC with Harry Stebbings: Erik Allebest [Summary + Transcript]

01:05
Erik Allebest
Thanks for having me. I try not to take myself very seriously. I love dressing up in different costumes and being weird. So thanks for using it. No,

01:14
Harry Stebbings
Listen, Dude, It kind of goes straight to our first point, Though, Which is, You know, You love doing things that are slightly out there. I heard that your first entrepreneurial activity happened at nine. What was it? That's at a young age.

01:27
Erik Allebest
Yeah, I was always scrappy. And I don't know. My dad was the same way. He was always starting stuff, Doing things. I did several things at a young age. I would sell things at school. We would sell either candy bars or bracelets or things. I would go to where the high school kids would drink beer and leave all their cans. And I would collect them all and go recycle them. I would go door to sell stationery. I was just always hustling for something, Some way to.

02:03
Harry Stebbings
I have this theory that exceptional people show exceptionalism early in terms of entrepreneurial activity. Do you agree with that in terms of the best entrepreneurs show entrepreneurialism early? I'm just intrigued.

02:16
Erik Allebest
I mean, You probably have a you probably look at a wider sample size than I do. I look at myself, You know, Obviously I did start young and several of the other people I know have as well. But there's also some great, You know, Later in life entrepreneurs who kind of did something and then they had like a moment, A spark. So, You know, I don't I don't know. It's a it's a fair thesis.

02:34
Harry Stebbings
No, No, You're clearly not a venture investor, Because if you were, We ignore the data set that disproves our theory. So. There's still some training for you to do, Erik. Luckily, You're actually building value. You say before that you're generally unemployable. Why do you think that, And what makes you unemployable?

02:55
Erik Allebest
It's kind of funny. I have, Like, This thing inside of me that if it's like, If it's my mission of something I want to do, I am. 100% in. I am 200% in. If it's somebody else's thing they want, It just doesn't motivate me. And this is my dad. And now my. 15-year-old son is exactly the same. If he wants to do it, He's thousand. He just can't be stopped. But if it's something someone else wants him to do. You said that your.

03:45
Harry Stebbings
Father was the same, Having watched him then operate. Were there any takeaways for you and did that impact your mindset?

03:52
Erik Allebest
I think my dad. He ended up doing something he loved, Which was serving people in the legal community. But he really doesn't love being a lawyer. So he cried a lot of different things. And unfortunately for him, They didn't really pan out. And so he always fell back. And he came from a very poor immigrant family after World War II, Moved to the US when he was five, And really had nothing. And so he had a bit of that immigrant mindset where like, Be a doctor, Be a lawyer, Be a professional, And you'll always be safe. But in his part, He was an entrepreneur, So he tried a lot of different things, But always kind of fell back on being a lawyer. And he's great at it. He loves it. He does estate planning,

04:31
Erik Allebest
So he works with great people and he's almost more of a therapist sometimes than a lawyer. But he had that fallback. And there was a part of me, Too, That almost had a fallback to where I was like, Oh, I probably should go do, You know, People are all go do a JD MBA. You have a fallback. And I'm like, I don't know, I want to do chess or something. So anyway.

04:48
Harry Stebbings
That was going to be my question, Though, Which is like, You know, Bluntly, An NBA is a non risky move. It is seeking security, Actually, By definition. Brian Halligan at HubSpot said that recently because he did one, Too. Like, How do you reflect on that? Like, Did you want to downside protect and how do you think about risk?

05:05
Erik Allebest
I didn't really understand what an NBA was, So I don't really view it as like a downside protection move for me or like a career advancement. I mean, It was literally at first a little bit. I got some career advice coming out of college. I was so lost. Because. I was an English major, But I really loved technology and entrepreneurship. But none of my education prepared me for that. And then I was just scrappy and doing things. But my parents and my in-laws and everyone's like, Hey, You need to go get a real job and you need to go do some stuff. So I applied to business school and law school. I didn't get anywhere. I didn't get in anywhere, Because it was right after the dot-com.

05:46
Erik Allebest
You know bubble boost bubble burst in 2001 and i got rejected to every school and i was like oh man so then i'm like all right i'm just gonna go start and do something and then later it kind of was always in my mind and then i got pretty unhappy in the entrepreneurial thing i was doing and thought you know actually with my wife's like hey you need to go back to school like you are miserable like change pace go do something and. So for me it was more of like an. What did you learn about yourself then?

06:21
Harry Stebbings
Because it's clearly been a clarifying moment for you. What did you change or learn about yourself through that process?

06:27
Erik Allebest
Well, First of all, I learned that. I was an asshole and I wasn't a very pleasant person. And one of my dear friends out of business school, Andy Dunn, Basically one day said to me, Hey, Let's have lunch. And we go have lunch. And he's like, Hey, You come off like an asshole all the time. You don't smile that much. You kind of like assume. I'm going to try and, You know, Fix my. RBF, my resting unhappy face. And I'm going to, You know, Try to be a bit more alpha minus where it's like, Instead of being in control of every situation in the room, Step in if people want me to, Or I'm willing to, But like leave some space for others. And so I'm going to try and, You know, Fix my RBF, My resting unhappy face.

07:18
Erik Allebest
I learned so much about myself in that way. And I've really become a kinder, More compassionate, More self-aware person, You know, Through Stanford Business School. I'm not sure that happens everywhere, But it really happened for me. So that's one major takeaway.

07:32
Harry Stebbings
I think the show does very well because I'm always very candid with my own troubles. I have often been given the same feedback. But I also think and I also get told by other people what makes me very strong is the fact that I am kind of very direct, Very concise. I don't mess around and I will guide conversations in a productive way that leads to outcomes. It might not be the most emotionally, Like, Careful, But it's good. And so I guess, What would you advise me, Having experienced this and then also having come through it? I don't want to lose the concision and-.

08:08
Erik Allebest
What do you say? It's not an either or. It's not like be nice and then don't be direct. It's like you can be both. And I think a lot of it has to do with like the number of deposits and withdrawals you make in any relationship. And so it's like your bank account. So you need to have a way more positive interactions with someone if you're going to have a negative. I'm going to go ahead and get. Started. I'm not everybody's favorite flavor of ice cream and, You know, That's all there is to it.

09:06
Harry Stebbings
Do you find it disheartening when you do a lot of deposits and then when it comes to withdrawals, People don't give in the same way?

09:13
Erik Allebest
I have accepted that. So that's just a role. That's a position. That is just... I'm a CEO of a company of hundreds of people. I'm a father of children. I'm the most one of the most proactive of my friends in terms of putting activities together and keeping in touch and doing those things. I'm fine with that. I embrace that role.

09:37
Harry Stebbings
So we go through that process at business school and we kind of come out a little bit more aware of who we are. How did chess.com come to be? Because I know you bought the domain, I think it was in 2006. Talk to me about that process.

09:52
Erik Allebest
Just like how's my third chess business, Which is totally absurd to say, But. I did.

09:57
Harry Stebbings
They are amazing that you married such a wonderful person. A third chess business. I've never heard that before.

10:05
Erik Allebest
Yeah. So it started while in college kind of teaching chess to kids and setting up afterschool programs where lots of kids would come and, You know, I was basically a labor arbitrage business where. You know, 30 kids would pay, You know, 15 bucks an hour to do an after school club. And then I would pay an instructor, You know, $50 to teach a class. And I did that in dozens of schools while I was in college and after. And then I kind of got this idea to franchise that business with this other science company that was doing the same thing. And then they needed chess equipment. So I started buying chess equipment and reselling to them. And then I'm like, I got to cut out the middleman. So I started buying stuff in China. Then I had extra inventory. And I was like,

10:45
Erik Allebest
I'm gonna start selling this extra inventory online. So I created a website with my friend Jay. We started doing basically like the amazon.com of chess before Amazon was doing anything except books. And so it kind of went from a teaching business to an e-commerce business. And then while I was doing e-commerce, I was like, Customer acquisition cost is killing my business. I need to get off the Google AdWords or Google Ads at the time, Build something that is meaningful for people and for users, So they will come and do that activity. And then I can sell them some chess equipment. And I was like, I need to build a community. I want to build the MySpace of chess. You're not going to do that in an e-commerce site. I want to do that on chess.com. So then I contacted the people who owned it.

11:25
Erik Allebest
It turned out they needed, They had like $5 million of like debt on the books and they needed to go bankrupt. So there's a bankruptcy auction. And I bought the domain out of bankruptcy. And me and Jay started chess.com.

11:36
Harry Stebbings
Okay, So a couple of different things. One, How big was the e-commerce site when you realized, Hey, I want to move into a community?

11:42
Erik Allebest
We were doing... We each made 1 to 2 million dollars a year in, I think a little over 2 million a year in revenue and was making good, Making good money.

11:52
Harry Stebbings
Yeah. Okay. And so then we get the domain name and through that process, How much did you end up paying for the domain name? At the time, Were you like, Shit, That's a lot of money. I mean, This is 2005, Were you like, Hell, This is the most important address that we will have.

12:09
Erik Allebest
Yeah, I mean, It was a no brainer for me. Zero concerns dropping that money.

12:14
Harry Stebbings
When I spoke to Leo, He asked the question of how much of a role has the domain name chess.com played towards your success?

12:22
Erik Allebest
Ridiculously large role, Especially at the beginning. And the beginning sets the tone for later. Now, I mean, In today's world, If we hadn't done it, If you would, You have to start on chess.com. Probably not. But given the time that we started and how it worked and it was web first and all that. So it was critical at the time. And so by the time we hit the kind of mobile ecosystem where app downloads don't require a dot com and some people don't even have websites, Et cetera, It's way less important now. But were already massive at that time. And so it was fundamental.

12:55
Harry Stebbings
You buy chess dot com and then what? Because we can look at it today and it looks unbelievable. But how did you get the first million users?

13:04
Erik Allebest
I opened up Microsoft Word and I started building wireframes in Microsoft Word. That's how. I know where I was coming from. And, You know, Had a friend of mine from college design a logo. And then I kind of handed over this, You know, Then I took these wireframes from Microsoft Word and then I started building. The front end of these web pages in. Macromedia Dreamweaver. That's how long ago that was. And then I would build these web pages, Push them through an FTP server to a fake domain name that we just... That I and my co-founder technical, Co-founder Jay had. And he would take that. HTML CSS document, Put it in with some PHP and MySQL and push it live to the server. And that's how we got started. And then so we built a homepage, We built a login, We built forums,

13:50
Erik Allebest
We built blogs, We built news, We built everything but how to play chess at the start. We're like, We're just going to do a community and people can play on Yahoo or on ICC. And then they can say that what their rating is, And we're just going to be a social media profile. But then people started coming. They're like, Do we want to play chess? We're like, OK, OK, OK, We'll build that. But that was really hard to do because back in the day, People were downloading clients to play. Gaming was all done on like executable programs on your computer. Doing it in the browser was like an insanity at the time. JavaScript wasn't mature enough. There was no WebSockets or anything like that. So, You know, That's a whole other podcast.

14:28
Harry Stebbings
Okay. So how many users did we have before we hit the actual chess playing just on the community build?

14:34
Erik Allebest
It was definitely under a million. But every day, You know. A few hundred people would sign up. I mean, Maybe a thousand or more would come to chess.com and then we would convert a fairly high percentage of them to just creating an account. But there wasn't a ton for them to do other than forums. But back in 2006, Forums was a big part of the internet. So it was popular.

14:57
Harry Stebbings
When in your mind did you have product market fit? When did you go to Jay? We've got this. This is good.

15:03
Erik Allebest
It was after we launched the learning product. Where you would go online and move a piece and it would give you a response and we took basically all the learning instruction material that we bought out of bankruptcy along with the domain name which was called chess mentor and we put that online. And then we said, If you want access to this, You got to subscribe. And once we did that, We immediately had people subscribing and we're like, Now we have money. People are voting with their dollars and saying, We like this. And then we're like, OK, It's time to like. 100% all in on this.

15:39
Harry Stebbings
At this time, What was the mission? I know it sounds like a strange question, But every company has a mission. You know, I think most of them are pretty fluffy and bullshit, To be honest. How do you think about the mission then and mission driven companies, Given this was the time when you had to create it?

15:55
Erik Allebest
Yeah, The mission was very clear, Clearly to serve the chess community. And were part of the chess community. I mean, Jay was a strong, You know, Is a stronger chess player than me. But I was very much into the game and we wanted to serve ourselves. We wanted a place that felt fun for us, Knowing that if we did that for us, We would serve the chess community more broadly. So the mission at the start was to, Like, Make cool stuff for the chess community. So for a long time, It was serve the chess community only. It later became serve the community and like be the best place to work. And we kind of like it was very early on that we said we want this to be a place where we do things differently.

16:37
Erik Allebest
But people really love working here and participating with us. So whether you're an employee or a contractor or whether you're a grandmaster, Etc., You know, We want to be a great partner for you. And so. We wanted really how I wanted to make a place that I wanted to work, You know, Again, So so we did that and that became a second mission of ours. And then fast forward when COVID came and the Queen's Gambit hit. And our numbers like. 5x'd overnight. It grew the game of chess. 5X. And we before that had never really thought that we had the tools to grow the game of chess. We thought that people who were interested and we'll capture that and serve it. But we didn't think we could grow it. But now our third mission.

17:27
Erik Allebest
Is to grow the game of chess and we are doing everything we can to get more people interested in this game that we love.

17:33
Harry Stebbings
We're going to move actually to Queen's Gambit later on. I want to actually just kind of stay with the chronology and kind of work through those different missions. You mentioned like adding the chess mentor, The learning people paying for the product and serving that community. When we think about the decision to raise or not raise, Why at that time? Did you decide to not raise? Because I'm sure you could have done. You were now making money. You had traffic. Things look good. What was that conversation like between you and Jay?

18:03
Erik Allebest
Oh, No, We, We tried for like the first. 5 years to raise money. We tried many times. We tried angels. We tried. I met Peter Thiel. I met a bunch of different angels. I went up and down. I used all my connections up and down Silicon, Sand Hill Road to try to raise money for chess. And just time and time again was told, The market's too small. This is uninvestable. Maybe I'll give you a little bit of money at an insanely low valuation. And I was like, I don't need it that bad. So anyway,

18:44
Harry Stebbings
When you look back, Did you do anything wrong? Would you have changed how you presented?

18:50
Erik Allebest
Well, I mean, Now knowing what I know, Chess is a much bigger market. I don't think I did anything wrong. I think everybody was wrong. I think consensus, Including from me, Was that chess was too small. And so why would you invest in a business that you thought would make $10 million in revenue at its best? Why would you do that?

19:08
Harry Stebbings
I'm just playing devil's advocate here, And I may be stirring the pot. What if they were right? Just pause and just say, And like... If you think about venture being five, Ten billion dollar outcomes, If we think about a 200 million dollar revenue business, A 300 million dollar revenue business on public market multiples, You're looking at six, Eight, Nine, 10x. It's still hard to see the $5 billion exit. Am I being shortsighted?

19:35
Erik Allebest
I don't care about I mean, I don't care about money. I'll be honest. I just don't care about it. And so it's just not the lens I look at. I mean, I think if you're a venture investor saying like, Hey, I need to get to a 5 billion exit, Like, Test may not be your investment. And that's totally okay.

19:52
Harry Stebbings
Why do you not care about money? Just love to.

19:57
Erik Allebest
I love experiences, I love having things, I love the security of like feeling safe and all and having my needs and most of my wants met. But. I know people where money is like self-worth or it's a scoreboard or it's like freshest something. And I just don't know why. I don't feel that. Like, I have friends who don't love food. I love I have a deep relationship and love of food. But I have some friends who are like, Yeah, I eat when I'm hungry and food is good. But I'm like, No, No, No, I love food. Well, It's kind of opposite. I like. Okay, I appreciate money, But I don't love money or I'm not motivated by it. I don't care about it in the same way. I don't know why.

20:39
Harry Stebbings
I used to place a lot of emphasis on it and it's like. I am valuable because I have money and then I'm valuable to other people, Which did not necessarily make me happy for a long period of time. Where do you determine your self-worth from them? Because I think I'm in a bit of a self-discovery of like if it's not that. Then why am I valuable to someone?

20:58
Erik Allebest
I would start and say... And this is something every human struggles with. But the first question should be, Why are you valuable to yourself? If your entire self-worth is a reflection of other people, You'll always be chasing that mirror. You have to start with good, Balanced self-worth and self-value. And. I'm not preaching to you. I'm not your therapist. But that's for me. And that's a struggle for me as well. I'm a very extroverted person. I love being around people. I love doing all that. But... Self-care, Self-talk, Self-worth, All of that is like very critical to my well-being and makes me a better person to show up for others. And then also that interaction is important. Anyway,

21:43
Harry Stebbings
How do I answer the question of why am I valuable to myself? How would you answer that?

21:47
Erik Allebest
There is inside of all of us an inner person, An inner being, And you have to get comfortable and happy with who that person is. And you can do that in a number of ways. Some people do meditation. Other people do alone time where they can find peace in long runs or walks or other things. Other people get it from achieving something and being in the flow. And it could be skiing, It could be sports, It could be writing, It can be all sorts of things. But I think there's something about that. And. Another day we could unpack, But I did do an ayahuasca retreat one time. It's the only drug I've ever done. I did an ayahuasca and part of that journey for me was to get comfortable with myself and really. Be happy and solid and grounded in myself.

22:38
Harry Stebbings
When was that?

22:39
Erik Allebest
Two years ago.

22:40
Harry Stebbings
Did that change how you operate as an entrepreneur?

22:43
Erik Allebest
It totally did. How so? So then to go do an ayahuasca retreat, I was so afraid to do that, To be in a mind, An altered mind state. But when I did that, It actually, For the first time, Took all the other mind altering things out of my mind. And I was present only with my mind. And my biggest takeaway from that retreat, And it took drugs to get me there. It's medicine. Sorry, For those who practice, It's called medicine. But it took a medicine drug. To teach me that I am every day microdosing on drugs. I am microdosing on Slack. I am microdosing on email. I am microdosing on Zoom. I am under the influence of drugs every single day and every single moment of my life. And. I am in an altered state because of that. And so.

23:51
Erik Allebest
I, the most helpful thing from that was to realize that when I am feeling anxiety or when I am feeling something, I am probably, And I'm not centered. I'm probably under the influence of something. And it may not be a drug as we characterize it, But it's probably slack. It's probably a message someone sent me. It's probably a fear. It's probably something someone said on Reddit. I am under the influence.

24:15
Harry Stebbings
And so then you change what you do, Right? You can't avoid email. You can't avoid Zoom, Sadly.

24:20
Erik Allebest
No, But with just the recognition of saying, I'm feeling this because of this thing, But I am actually a safe. Like grounded person outside of that i am not my slash i am not my inbox i am not my social media presence. I am something deeper, Safer, More foundational than that.

24:41
Harry Stebbings
I love that. I've never done an ayahuasca retreat. I have done alcohol. I don't drink anymore. Can I ask, Going back to the fundraising element, When you said you tried and it didn't happen, As a result of not raising money, Did you do things differently?

24:57
Erik Allebest
I had to do it differently. Everything that I, Everything I saw going on in Silicon Valley was based on. Large amounts of readily available capital. That means getting the best, You know, Co-founder from, You know, Berkeley or Stanford or and that means like setting up an office on, You know, California Ave. It meant having a full time, You know, Chef and masseuse in the office. It meant, You know, Everybody hiring the best people you could, Putting them in the office and doing everything right there. And later on, It meant. Doing everything in the cloud and it meant buying ads on Facebook. It meant, You know, Scaling up as quickly as you could. Everything was like spend, Spend, Spend, Spend, Because eventually, Eventually you'll think about monetizing. We did the opposite. We thought about monetizing immediately. Everybody was remote. There was no office.

25:53
Erik Allebest
Our engineers were spread all over the world. My co-founder was my college buddy from San Jose State. And you know, It was like everything was the opposite. And because we had no money and. I'm really grateful for that. Sorry.

26:08
Harry Stebbings
No, It's fantastic to hear that you don't need me and my whole profession. I'm thrilled. Just don't tell anyone, Right? My question to you is, Having been through that experience, Having done creativity because you had to. What do you think and advise founders when you see them today raising again more money than we ever thought possible?

26:32
Erik Allebest
I think raising money feels a lot like earning money in that it's a validation. It's a it's a self-validation. I'm. I'm worth the money. My idea is worth the money. It can fill a hole in your soul and it can make you feel like you're going to be more successful. I'm. Eric Allebest. We're not right because they had money and knew they could get it.

27:20
Harry Stebbings
Where did not having money damage you? If you look back to the early days, Where are you like? If we had $5 million there, We really would have been in a different spot.

27:30
Erik Allebest
It's very hard to say. I'm not a person who regrets very often or is backwards reflective in that way because everything turned out great. And. I don't know what would have happened if we had hired a bunch of local people. Would we have moved too fast and done the wrong thing? I mean, There's something about moving slow.

27:48
Harry Stebbings
Do you think you went slowly? That's interesting.

27:50
Erik Allebest
We definitely went slowly.

27:52
Harry Stebbings
Why do you say that though? I mean, When you look at the trajectory... I'm just saying, What's yours? I mean,

28:05
Erik Allebest
That's a.

28:08
Harry Stebbings
Sadly so, Erik. Sadly so.

28:11
Erik Allebest
I just read about this game, I can't, I don't remember the title. There's just, There's a mobile game that launched literally last year in the last nine months that in that, In those nine months did $400 million in revenue. Some kind of like snow survival game or something. And I'm like, I don't know. Like, Maybe I'm doing it wrong. I don't know. I mean, Dr. Lior, He made a lot of money faster than Chess.com did. Maybe.

28:36
Harry Stebbings
I mean, Lior is an incredible entrepreneur, So I'm very thrilled to have invested in him. But not having money drives creativity in a lot of ways, As we discussed. Customer acquisition is one where traditionally you put money in the funnel. You mentioned the e-commerce business on Google Ads, Facebook Ads. Put money in the funnel and hopefully it comes out with positive unit econ. They didn't have that money. So how did you do creative customer acquisition? And what was some of those big lessons?

29:03
Erik Allebest
Yeah, We totally been burned on paid acquisition. And we pretty much made a. Eric Allebest, CFO, M Revenue M. Members and. People. All with. You know, It signals to the search engines that it's something valuable. And so it's always been an investment in content. The next platform of discoverability after kind of Google and, You know, App stores was YouTube. And you got to get content and it's got to be good. And then after that was Twitch. And we followed that. And then it was shorts and TikTok and we followed that. And so we always followed the content where it was and worked with really creative people and excellent people. And we invested in the product and we invested in the content and we invested in capturing search but not paid. So I'm sorry to all the businesses that operate on ad revenue,

30:12
Erik Allebest
But we don't participate in them.

30:14
Harry Stebbings
I'm really interested there because I mean, Content is obviously my business as well. Did you do a portfolio approach and see what worked in terms of content channel or did you just pick well each time? I just like to understand that transitory moment when you're deciding the next content platform to move to.

30:29
Erik Allebest
I think were smart about it. One of my other classmates at stanford you asked about nba you know these are worth it i have some brilliant classmates from stanford who've been really great to work with including andy including leor another one was marcella camberos who was at ipsy and. He and i talked early on and he told me how valuable getting a youtube influencer was to their you know cosmetic subscription business and i was like okay and i thought about that and. You know we started looking at that kind of you know early influencer you know marketing and we found some really great chess creators you know and you know we kind of started working that angle and it was really. Valuable for us super important.

31:16
Harry Stebbings
How did you pay them? What was that structure like? I'm intrigued.

31:19
Erik Allebest
It's always been a little different. Some is through kind of like chess.com affiliate. So if someone signs up on chess.com, And then they become a premium subscriber, They'll get a cut of that. Sometimes it was just some cash or an ambassador, Like we would do a year long ambassador for some dollars. Also, We also create value for them because we then expose them to our community. And then they get bigger and make money in their own channels. And sometimes it's a scratch my back, I'll scratch your back with embedding them on like our platform where people can. And discover them and then go to their platform. So it's kind of a range of all of those.

31:53
Harry Stebbings
It's really interesting. It reminds me of Logan Paul actually in Prime, If you'll forgive me for that analogy, Because like now they're such a big platform themselves that when they work with talent and influencers, They actually promote them too in a similar way. And so would you have done anything different about content? You know, When I look back at mine, I would have moved to YouTube a lot earlier. I was too late to YouTube, Not too late. We're on it now and we've done well, But I only did it.

32:20
Erik Allebest
I think podcasting is a little different because there was like these other platforms. And then when did YouTube become a podcasting platform? You know, I think for chess is visual. And so as soon as YouTube came out, We were like, We want to do that. And as soon as I mean, We were doing live streaming back when it was just in TV long before it was Twitch. Our very first live event that we really promoted was. Danny Wrench, Who's our chief chess officer versus David Pruess, Who was at the time our head of content. We put $1,000 cash on a plate in between those two guys and then had them play chess against each other. And that was kind of the beginning of our live streaming. And so we would put kind of static content on YouTube that was in the.

33:06
Erik Allebest
10 to 30 minute range. And then we would do live shows on. Justin TV or live stream. So Twitch does no attribution, You know, Safari does not do attribution. And so it's gotten harder to tell. But we've seen a tremendous amount of growth. I would say our most recent wave was completely driven off of short forms, Whether it's YouTube shorts, Instagram, You know, Stuff or reels or, You know, TikTok. It is. Totally driven.

33:56
Harry Stebbings
So we actually have separate teams on a per channel basis. Do you have separate teams or do you have like one social team?

34:02
Erik Allebest
We have kind of one team with kind of experts and people who have feels for different things. And the probably the smartest thing we've done is like old men step, You know, Old people step out of the room and like hire smart young people and young women and to kind of get in there with the voice and figure it out. And so it's just I'm kind of a stand back and watch these young, Amazing people like.

34:27
Harry Stebbings
When you look at the membership scaling, Was there needle-moving moments? We'll talk about Queen's Gambit, We'll talk about COVID, But in the earlier years, Was it really a continuous up but gradual? Or were there very strategic, Like significant moments where it really inflected?

34:44
Erik Allebest
There were a couple of moments that things took off. So one was with the kind of Twitch. I'm not smart enough to do it. And also sometimes I feel like it's too frustrating and I go do the puzzles and I feel like I get all the puzzles wrong. It's not fun. I was like, Man, He just told me that chess isn't fun, That doing puzzles isn't fun because he gets them wrong. And that conversation triggered us to build a product called Puzzle Rush, Where you just start with all the easiest puzzles and then they get harder over time. You feel all this success. And all this easy fun, And then it gets hard and you challenge yourself and you fail. But that product was super needle moving for us. It lit the world on fire. Malcolm Gladwell wrote about this product.

35:42
Erik Allebest
Like it was massive for us. And so there were just these little moments, Whether it was product or content that would inflame things and heat things up for a while. And then it would stick.

35:52
Harry Stebbings
Does Keith know that he was the reason that was created?

35:55
Erik Allebest
I know I told him, But he may not remember. But I did tell him that.

35:58
Harry Stebbings
But how? How important is early wins in activities? And so like you said there about kind of the consistent winning early, How important is having early wins to the success of an activity?

36:09
Erik Allebest
It pains me to say this, But somebody who wins their first game of chess is. Two to three times more likely to stay around than someone who loses their first game. And so then you're like, Well, You got to make sure that people win their first game. But doing that is like morally problematic in some ways. Do you make them play a bot so they but they think they're playing a person? Do you set them up with an opponent who's super, You know, Low rated compared to them? Do you? And there's all these things you can do. But there's moral hazard in all of it, And we've kind of avoided it. And so what we're trying to do is push people toward not playing a person first, But knowingly playing a coach-bot personality where they will win and feel good,

36:58
Erik Allebest
But not to just throw them in the pool of players against other people where there's a 50-50 chance they're going to lose. That's the honest truth.

37:05
Harry Stebbings
2 to. 3x more likely to retain. That's pretty incredible. Yeah, I was thinking, Fuck. Play a bot, Come on dude, Think of our retention numbers. Can I ask, How have retention numbers changed over time? Have they stayed relatively stable? And like, What is, What is, You know, I love Akan and Niwa because they're so fricking smart on retention, Bluntly. How do you think about great retention and lessons from that?

37:30
Erik Allebest
We are we have not historically been a metrics driven business. We are we've been a heart and mission and chest driven business. We are getting smarter about it.

37:39
Harry Stebbings
How did General Elanchi take that?

37:43
Erik Allebest
They knew who were when they when they you know married us, But they've been very patient and helpful to you know, They understand. That's a whole other topic, But we've had a very good coming together and seeing things. We started on different sides of the mountain. We've come together to really understand each other. It's been actually really awesome. Do you know,

38:05
Harry Stebbings
Like, Talk to me about not being a metrics business like. Why is it not better to be a matrix business? Just help me understand that because that is so different to what I normally hear.

38:16
Erik Allebest
I know. I don't I don't know what to tell you. We've always guided things through what we wanted to do and what felt right and what was in our guts and what was. On mission and what sounded cool and you know we've always done that i think that was really healthy for us at the start i think now having a blended balance of understanding those things is helpful to us but i do want to go back to the metric thing at some point so i want to yeah good how do you determine success if metrics are not at the forefront of what drives decision making like obviously i run media teams we are very matrix driven.

38:53
Harry Stebbings
And that helps me assign success or not to someone in some respects. It's the joy of media in a lot of ways. How do you determine success with not a metric first mindset? I mean,

39:05
Erik Allebest
Individually at the company, I think people don't think of success. I think they think of. I think they think of mission and serving the community and they take joy in that. And so if they do something that is well received by the community or helps us grow the game, They feel good about that. And so then how would that manifest in numbers? You know, We track active users, We track subscribers, We track usage of different things. And people kind of, You know, They know how many members we have and how that's going. And so it's just kind of a general happy-go-lucky feel. But there are numbers we're starting to look at differently.

39:46
Harry Stebbings
What numbers matter most to you today?

39:49
Erik Allebest
You know, Our daily active user is a big deal for me. Because it's very easy to just see how many people today are logging in to enjoy chess. That's very simple. You know, More though, I would say we're starting to, You know, Duolingo, You know, Their curve metric was super valuable. So we're now looking at that as a primary. So...

40:08
Harry Stebbings
Can you explain what that means?

40:10
Erik Allebest
It's kind of your. Your retention rate of your active users, Which means if somebody on week one was active and was again active in week two, What's the likelihood that they come back in week three? And so it's somebody who has shown a bit of a habit or, You know, They've shown that they're invested. They like the product. What's the chances that they'll continue to like it?

40:34
Harry Stebbings
And how does that differ from like a D30 number? Just so I understand that.

40:38
Erik Allebest
I think that what it-. Helps you see is not just like I logged in 30 days later, But that I made a habit out of it and I'm coming back regularly each week and it's become it's not just. I hey, I sent you a push notification on day 30. So you came back and did something. But it's like, No, You made this a part of what you do.

41:01
Harry Stebbings
And so we have that metric. We have DAU, Any others where we're like, This one.

41:05
Erik Allebest
So one of the ones that we're focusing more on now is a percentage of learners over players. Obviously, Chess as a service, People come and they play. It's like the primary thing they do, Which not everybody does. Some people come and they still do forums or they watch our shows or there's other things, You know, Different things. But the majority of people come and play. But not everybody turns into a learner. Our business is funded by learners. Playing is free, Learning is behind the paywall. And so the percentage of people who want to learn and improve as a percentage of players is something that helps us understand that people are getting greater value out of our product than just playing.

41:43
Harry Stebbings
Can I ask what percentage of people are learners versus players?

41:47
Erik Allebest
It's different per product. And so we're trying to kind of wrap it into one number. So I don't have that exactly. But let's just say that... Of our active users, You know, It's actually a strangely low number, But it's like 60% of our active users come in on a day and play. Half of them will do. A we'll do puzzles so half of that number will do puzzles and then half of that number again will do lessons game review is actually the most popular a lot of people will do game reviews so that's like a anyway so. We're trying to wrap that into a more cohesive product for everybody. But those are the three things that people pay for.

42:29
Harry Stebbings
That's really interesting. But actually, That's kind of more than I thought though still. On those numbers, It's kind of like 10%, Really, If you think about it in that way, Which is reasonably high, Actually, In my mind.

42:39
Erik Allebest
So just, We could say, We've got about 150, A little over 150, 160 million registered members. We have... Take a weekly active users is probably around 10% of that, Around 15 million. About 10% of that are active subscribers.

42:59
Harry Stebbings
And active subscribers means they pay monthly?

43:02
Erik Allebest
They pay monthly or yearly.

43:03
Harry Stebbings
Wow. What's the difference? Sorry, I'm so interested. And anything that I'm prying too much, You can just say Harry fuck off. But like, How many pay weekly versus yearly? What's that mix up?

43:14
Erik Allebest
The majority of people pay yearly. And most people do tend toward our highest paid product because they get the most access. And our retention on paid users is really good. Another one of my Stanford classmates, Coddy Johnson, Worked at Activision. And he's like, Wow, I thought I had seen amazing retention numbers with World of Warcraft. You guys are up there as like very sticky subscriber base.

43:41
Harry Stebbings
What's your retention on paid users?

43:43
Erik Allebest
I don't have the exact numbers, But I'm just saying it's very high. But that changed. Sorry, Just to say that changed when the two we had two different, You know, I sent you our numbers. We got some interesting graphs where it's kind of grew and then it had a. Queen's Gambit bump and then it had a more recent 2023 bump. The Queen's Gambit cohort, People saw the show, They saw chess pieces moving on the ceiling and they're like, I want to learn chess and get better. Those people. Subscribe at a higher rate. Then normal, Then normal baseline.

44:16
Harry Stebbings
What do you mean? What do you mean they subscribe to her? Right? There was more of them that entered the funnel.

44:20
Erik Allebest
The percentage of people who became subscribers was higher than our previous kind of steady state cohorts because they wanted to be learners. They wanted to learn and get better. And Beth Harmon made them feel like they could be world champions. It was awesome.

44:34
Harry Stebbings
Did that bring in a load of low quality leads though, Which is like, Yay. We want to beth Harmon. We want to learn. And then actually they're like, Oh, Fuck it, I've got kids and I'm busy and they churn. Was that a leaky bucket actually, Or did they retain? I was really interested by that.

44:50
Erik Allebest
They subscribed at a higher rate, But then retained at a lower rate, To your point. And that kind of we swallowed that. But it's not like it went up and back down. It went up and stayed up significantly. So, Yes, It was net massive growth. But yes, They later. Retained at a lower rate.

45:07
Harry Stebbings
Yeah, That's what it is. Yeah, Totally get that.

45:09
Erik Allebest
But then went to 2023 where the cheating scandal and Mittens the chess bot and short form content blew up. And then we also just exploded in schools. But now you have a whole bunch of high school kids and junior high kids and younger people getting into chess and they subscribe at a way lower rate. And so registration numbers went through the roof. But our subscriber numbers didn't follow.

45:34
Harry Stebbings
Can I ask you, When you look at these kind of very strategic and clinical moments in the company's trajectory, Respectfully, A lot of them were outside of your control. When we look at COVID, When we look at Queen's Gambit, No execution that you did drove that. No offense. What do you advise an entrepreneur given the serendipity, Fate, Luck of life?

45:56
Erik Allebest
Be in the right place, Man. Like. Be paddling. We always say that we're in the boat and we are paddling and our sail is up. And we are, But we're also rowing. And when the wind comes, We're already ready and we're steering and we're doing the best we can. But we're not in charge of when the wind comes. Always. You can try. You can try to find the current and do different things. But, You know, You're not wrong that sometimes it's very, It's stuff outside your control that, You know, Makes a massive impact in a business. And, You know, We've had several black swan moments compounding and it's been pretty, Pretty phenomenal.

46:34
Harry Stebbings
When you look back now, Is there anything that you would or could have done to capitalize on the moment more? Be more ready, Had more content, Had more products, Done anything to capitalize on those two moments more?

46:47
Erik Allebest
I mean, We can always have a better product that's better for beginners and learners and onboarding and all of that. But it's actually interesting that kind of earlier product I talked about with Puzzle Rush, We made a focus in 2018. To make our product more fun. More fun bots, More fun puzzles, More fun everything. And right as we finish that, COVID came. And then were starting on short form content and more fun bots and different types of things. And right then, Cheating scandal came. So were doing all the things to make the game at the first was to make it kind of more fun. And then later was kind of more content readiness. So we did the things to be in the right position at the time. And we really feel lucky that our strategy was met with the, You know, The one time,

47:38
Erik Allebest
You know, Exogenous event or whatever.

47:41
Harry Stebbings
Okay. And so we look at these very seismic moments that have incredible stretch removing abilities for business. You then decide at some point specifically in 2022 to raise cash from GA. Why can't you just.

47:56
Erik Allebest
Not totally accurate, But go ahead.

47:58
Harry Stebbings
No, Go for it. I would. Accuracy is important.

48:01
Erik Allebest
After were rebuffed by all investors early on, We kind of said, We don't want to take any money. We're going to do this ourselves because before we had no success and no one wanted to invest later, We had success and everyone wants to invest. And we're like, You know. You can you know, No, Thank you. I have a lot of no thank you emails out there. I'm sure many people watching this program have gotten those no thank you emails from me. But someone came along and said, Hey, I really love chess. Yes, I'm an investor, But I want to put my own money in and I want to just I want to be I want to invest. And I was like, Okay, I live in Silicon Valley. One day I want to buy a house like.

48:38
Erik Allebest
Maybe some of us want to take some money off the table, We'll sell some secondary and we'll do a little bit of a liquidity internally. And so we sold a small amount of. 10% of the company early on. And that guy was like, You know, He's like, OK, Well, I need this preference and I need this thing. And we're like, No, No deal. Go away. You're on the same terms as all of us or get out. And he's like, OK, OK, OK, Fine. I will invest same terms as everybody. No preference, Nothing. No guaranteed returns. I just want to own equity. OK, Great. Now we're all on the same level. He invests 10%. He's like, I love chess. I'm going to be an investor forever. OK, Great. Fast forward a couple years, He's like, Hey, I got to get out.

49:17
Erik Allebest
I got some LPs that need some money. I'm like, LPs? I didn't even know about this. You told me you were going to be in forever. He's like, No, No, No, I got to exit. But I got this other guy who loves chess. His name isai Scheinberg, Founder of PokerStars. He loves chess. He wants to meet you. I meet with him. He's like, Hey, I want to buy in. I want 50% of the company. We're like, Get out of here. We're like, No chance, No way. And he's like, Okay, I'll do less, But we want these terms. And we're like... Get out of here. No chance. No way. He's finally he's like, All right. So we come to terms and he buys like, You know, A little more, More, A little more than 20 some percent. Right. Okay.

49:51
Erik Allebest
We took a little money off the table, But he's like, Hey, I love chess. I'm gonna be here forever. A couple of years go by. He's like, Hey, I gotta get out. I'm like, Get out. Why you love chess? What? And it's going well. So then he's like, Nope, I got to sell. And he's like, Either I'm going to sell to who I want to, Or you guys can choose who I sell to and you guys can do that. So now I start running this process where I start talking to all these people and private equity this and different venture firm there and all these different things because I got to buy him out. That's when we met GA. But again, It was to buy out existing equity. It was not to raise money. There was no primary money put in whatsoever.

50:24
Erik Allebest
It was all just buying founders equity and equal ownership.

50:27
Harry Stebbings
Do you regret selling to that first investor?

50:30
Erik Allebest
Totally. Every day, Every day I think about it. I have so few regrets in life, But that is one.

50:39
Harry Stebbings
What does that lead to?

50:41
Erik Allebest
It's not a great thought. I don't like it. And but we're here now. And so I have to believe that the best things happen and the universe will take care of it all. But I mean,

50:50
Harry Stebbings
How much did you sell that first time sample?

50:53
Erik Allebest
I actually don't remember. 20 million, 20 million valuation.

50:57
Harry Stebbings
Whoa, Okay, So you're doing like $2 million for the co founders,

51:02
Erik Allebest
Maybe something like that.

51:04
Harry Stebbings
Wow. Okay. And then the PokerStars guy bought it at what price?

51:08
Erik Allebest
Maybe around three times that.

51:10
Harry Stebbings
Okay.

51:10
Erik Allebest
Evaluation.

51:11
Harry Stebbings
And then GA paid ten times that?

51:14
Erik Allebest
Yeah.

51:16
Harry Stebbings
Wow. Do you like working with institutional investors?

51:19
Erik Allebest
I like Tanzine and I like Anton and I like Jesse and I like the people I work with. I have to say, I do like the people at GA. I don't want them to know that. So please cut that out. Just kidding. You can leave it. But I do like them a lot.

51:34
Harry Stebbings
I do too. I've had Anton on the show. I've had Martin Escobari. I think GA are one of the best. So totally. Did things change post having an institutional investor?

51:44
Erik Allebest
Of course it changed. But. The mission didn't change. And I know you're like, Mission driven, Maybe that's BS. It's not BS for us because chess is like, It's a stewardship for us. And we really do feel the mission. I don't know how to do a mission driven insurance arbitrage business, But you can do a mission driven chess business. Their view is drive maximum shareholder value. But you do that through serving your community and growing your game and building a great product. And our view is. I get it. It's inputs and outputs.

52:27
Harry Stebbings
Driving shareholder value creates more enterprise value. That, So I totally understand that. And I, I buy your mission by the way, I just would be infuriated to work with it. But I totally believe it and I think it's wonderful. So. I very much am loving it. You said something earlier and you beat everyone to this trend. You said that you were remote from day one. And. I wanted to talk about this. And, You know, Many of the mutual friends said we had to. Can you help me understand why is remote work better? Because I can't think of a role which is done better remotely. And people disagree with me. And I'm always open to have my mind changed. So make the case for remote, Erik.

53:14
Erik Allebest
First of all, Ten lint. Is all over the world. And if you are geographically confined on talent, You have a smaller hiring pool and you are now competing in ways that are hard. It's hard to compete against these massive dangled comp packages in certain areas and things. It's very hard. I would say that it's been amazing. So to have an international team where we have people india working with people in Serbia, Working with people in Argentina, Working with people in New York, And it's just a beautiful thing. I don't know how to tell you. It is so beautiful. And because it's mission driven and because the way I always say the weight of our mission crushes egos. If you have an ego, This is the wrong place for you. Get out and go find somewhere you can serve yourself.

54:04
Erik Allebest
The weight of our mission will crush you. It crushes politics, It crushes bullshit, It crushes egos. And so we're all there to serve the mission. And when all that other stuff is gone, You're now collaborating and serving each other to serve the mission. It works for us. And so we have really smart people who are passionate about what we do, Who come from everywhere. And the other thing is, Is they feel respected in their lives. They can show up to work when they want. They can do the work that they want. They can walk their dog in the middle of the day. They can take time off. They can do what they need to do. And so it is a joy for them to work. They don't feel trapped in the office.

54:40
Erik Allebest
They don't feel like they have to show up early to do FaceTime. They don't feel like they have to be the last one to leave. They don't have to pretend like they're busy. It's so life enabling to them that they're grateful to have the job and they give everything to it. And that includes me. I love my life. I love the fact that I'm sitting in a room and that there's no one around to bother me and that I'm doing this. And I don't have to worry about if someone is judging me for how I'm spending my time or what's going on. So I don't know. It's freeing.

55:07
Harry Stebbings
Do you miss the human interaction and do you miss the creativity that comes from being in person?

55:12
Erik Allebest
I have a lot. I am married with four kids. I don't miss human interaction. I know that some people do. And that is a thing that, You know, They'll go to a coffee shop or they'll go at a coworking space or, You know, I understand that's a real part. It is not a challenge for me in my life.

55:28
Harry Stebbings
What have been the biggest lessons in terms of what it takes?

55:48
Erik Allebest
Consumers of your own product, They lived chess world and life. So they get to participate in that thing. And the other crazy thing is that we are nobody's highest paying job. We immediately filter for highest pay. If you are looking for your highest paying job, It will not be chess.com. And so anyone who's hoping for that will go take a job somewhere else. And they are here for passion. And they're here. We pay as well as we can, But they're never going to leave for money. They stay here for lifestyle, They stay here for mission, They stay here because we care about them and take care of them. But we don't churn people who are just constantly looking for the next most money they can make. Those people don't take jobs at chess.com.

56:31
Harry Stebbings
When people have got through the door who aren't mission driven, Who do have egos, Who do have desires on finances, It's inevitable they get through the door. What did you not see that you should have seen?

56:42
Erik Allebest
Sometimes they say money doesn't matter or they're, You know, And then later it becomes, You know, I had a kid, I need this, You know, Or a crazy offer comes in. We're always like, Hey, We're super happy for you. If that's now the important for you, Go do that thing. That's great. We're happy for you. Other people will. You know, So it's usually a life circumstance will change. Occasionally we'll get like a bullshitter who will come through and suddenly they come in and they seem like the nicest person. Then they come in and they're like kingdom building and, You know, Backstabbing and stuff. And we're just like, Get out, Like immediately get out.

57:14
Harry Stebbings
What are the biggest mistakes you see founders make when they're trying to do remote well?

57:18
Erik Allebest
I think treating people like kind of like assets, You know, Kind of treating people like workers who are supposed to do a job rather than like. Teammates who are on a mission to do something. Everybody wants to be respected and everybody wants to feel like what they're doing has meaning. And I think when people feel that it's like, I'm task oriented to do this thing that generates this, That makes money. I know that's what a business is and I know that's what work is. But when deep down, When you feel that, I think it's hard to show up when you feel that's what you're doing. I think when you show up to work and feel like there are people that I care about who are relying on me or there's a community that cares about what I do,

58:02
Erik Allebest
It's very easy to show up for those people.

58:04
Harry Stebbings
Do you pay people according to national averages? You mentioned global workforce. How do you think about like benchmarking and comp aligned to national average or same across the world?

58:15
Erik Allebest
No, It's definitely nationally regulated. It's very hard to do. Compensation planning for a completely global company is super hard to do.

58:23
Harry Stebbings
Why is it so hard and what have you done well at? Like, How do you do it well?

58:27
Erik Allebest
I don't... I probably hired the first... 300 to 400 people, Myself, Who worked at the company. And I would just say to them, Hey, How much money do you need to do this job? And if we can make that, We'll do it. And if not, I'll let you know. But really, What do you need to do this? Because I'm not going to make you an offer because I don't know your life. I don't know how much the average person makes around you. I don't know what your expectations are. So tell me what you need. And if I can meet that, Great. And if I can't, Hey, We part ways and we understand. And that's what we did. And people would say, Hey, I can do this. And I would say, Oh, That's great. Or, Oh, I can't do that.

59:05
Erik Allebest
This is probably my max here. And it's a take it or leave it. It's a little bit like that. But what's been great is to see globalizing. People wages have gone up because someone who used to in serbia work for nine dollars an hour now they have a global marketplace to work so that their wages have gone up a ton that's great for them and i'm happy and we've tried to adjust and do all that we can but again some people just frankly wage. Out of our company if that's what matters to them when you said hey what do you need.

59:34
Harry Stebbings
What percentage of the time did it come in above versus below?

59:38
Erik Allebest
Probably slightly above, More than at or under.

59:42
Harry Stebbings
Speaking of kind of money and what you need, You mentioned Andy Dunn before. I spoke to him before the show, And he said that you're wonderful in many ways, But you don't really like capitalism. What do you think he means by that? And you mentioned before capitalism 2.0. What does that mean?

59:59
Erik Allebest
If you look at the value structure of what's being... I mean, This is an age old argument. Look at the work that's being done by the people who are doing it. Look at the people who are managing those people. And then look at the people who invest in there in the finance industry and look at the where the value flows. Versus where the work is being done and it's just disproportionate and I understand that capital returns and a healthy market where people can invest their dollars to get returns is great for. I'm going to stop here. Makes it so that money doesn't flow in some ways to the people who need it or deserve it. And I don't know how to solve for this yet.

01:01:00
Harry Stebbings
What about ownership of companies? I mean this in the most non provocative way. If that was the case, What about splitting ownership across the teams? Giving everyone much larger ownership so you can have vesting schedules, But ensuring that the company is owned by the teams.

01:01:15
Erik Allebest
I love this. I wish that it were easier to do. For example, The global system of legality is so hard and painful. The moment you are an equity owner, You have a K-1 in. 37 states and. 12 countries. And the tax bill alone for managing the equity, Any equity stake you have can be worth more than the equity itself. And it depends on your structures and your countries, But ownership is so hard to do. And it's a real barrier to doing that. The other challenge is vesting schedules. So maybe someone owns, But someone comes in, Works early, Bails out. Now they have a bunch of ownership, Then, You know, But then they participate in all the upside of when they weren't there. And so there's a whole bunch of things around maybe.

01:02:05
Erik Allebest
The valuation when they joined versus when they left and they can capture that value. But there's a lot of problems you dilute out. And then so ownership structure in general is just very problematic. I think that is where the answer needs to happen. But there's so much regulatory and legal and global stuff to fix around that before we can really get to that.

01:02:26
Harry Stebbings
It might be one of the only few truly crypto native cases, Which makes sense, Actually. If you think about a decentralized ledger of ownership, Which. Would be relatively, I guess, Stateless in terms of governance and legislature, I imagine. I don't know. I'm bullshitting, But I'm a venture investor, So that's my job. Yes. Yes. I agree with that. Okay. When we think about that, I'm just fascinated. Like, Would you like to solve that? Or is that like, No, Like, I just think like that. And sorry, I'm too intrigued. Like, You're an entrepreneur.

01:02:57
Erik Allebest
It's possible in like my next thing, But I am. So overwhelmed by my current job that it's hard to think about anything else, But I have thought of that, Like, For example, Let me just try this out on you.

01:03:10
Harry Stebbings
Yeah.

01:03:11
Erik Allebest
What if there were a fund that only invested in companies where they cap their returns and excess returns trickle down to the rest of. I'm going to block this transaction as hard as I can. Unless... We set aside a huge percentage comparatively of the sale. Everybody is going to pay, I think it was. 7% of their gains into a separate pool. This turned out to be tens of millions of dollars. I'm going to. Go ahead and get started. Tens of millions of dollars off of the gains of people who exited at that time to go into a special pool to reward the workers and the people who are here. And I'm going to do it again. GA, If you're listening, I'm going to do it again. And it's important to me that money trickles down to the people who are doing it.

01:04:45
Harry Stebbings
Can I be so rude, Eric? And forgive me, I really like you. I'm loving this. Do you ever worry? I worry sometimes that I'm too direct. I'm too confrontational. Like saying like, GA, I'm going to do it. Do you ever worry that they go? Not so happy about that.

01:05:01
Erik Allebest
I mean, They had plenty of time to get to know me before we did this. You know,

01:05:08
Harry Stebbings
I think... I totally get it, But it leads to my next question, Which is, You know, You mentioned the tumultuous nature of life in some respects. I do want touch on Russia. You know, You took the decision to speak up against Russia, And. I think it led to... What you said, A call from the FBI about a contract to kill you posted on the dark web. Can you just take me to this? What happened? How did this go down?

01:05:39
Erik Allebest
I was just standing at the whiteboard, Like, Talking about something with a friend, And there was a call, And it was actually a local police station which said, Hey, Have you talked to the FBI yet? And I was like, No. And they said, Oh, Well, They reached out to us to let us know about, You know, This death threat on the Internet that someone had phoned up some money to have you killed. And the reasons were because of your stance on. You know? Anlaşıldı.

01:06:08
Harry Stebbings
Why did you decide to take the public stance? Many didn't. It can be unnerving for safety. Why did you decide to do that?

01:06:16
Erik Allebest
Taking a stand is hard, But sometimes you got to do it.

01:06:20
Harry Stebbings
How do you draw the line on what stand to take? That's the hard thing of like Israel, Gaza. Do you take a stand there? Do you take a stand on US elections? Do you take a stand?

01:06:30
Erik Allebest
It is all very hard. And I think, You know, We have not drawn very many. We haven't taken a stand too many times.

01:06:37
Harry Stebbings
Why did you hear?

01:06:38
Erik Allebest
Russia invading Ukraine. We have a lot of team members in Ukraine. We have a lot of team members in Russia who have mostly left. It was very hard to see. And. I feel like it's one of the great evils of the last few years is to see this direct assault. There are many other evils happening. And again, I understand the hypocrisy of taking a stand here, But not taking a stand there. But this is one of the most black and white issues out there. I would say Israel, Gaza is not a black and white issue. There are it's mostly just a black issue across all of it.

01:07:12
Harry Stebbings
Do you think politics has a place in the workforce?

01:07:15
Erik Allebest
I think a lot of people work for me think that it has a place in the workforce workplace. We try to thread this in one way, Which is to say we are not out there trying to have a stand on any particular issues. But our belief is that chess is for everyone. And that's an inclusive message. All people, All genders, All races, All religious affiliations, All everything.

01:07:42
Harry Stebbings
You think about moral stances to take. It's something that often parents instill on children. You have four children. Your eldest, I think, Is 22. How old were you when you had your first, Eric?

01:07:53
Erik Allebest
I had a pretty wild junior high. I'll just say that. I'm kidding. My wife hates that joke.

01:07:58
Harry Stebbings
All right. I was like, Whoa, Oh lordy.

01:08:04
Erik Allebest
No, I'm in my mid-40s here. I had my first kid at 23.

01:08:10
Harry Stebbings
Did you feel ready? Were you scared?

01:08:12
Erik Allebest
I was scared, But I was ready. I think being 23, For me as a person at that age, All that I had done in my life. Honestly, Some people are like, Oh, Late to launch or whatever. I was early. I was a very mature, Early, Mature person doing laundry by myself when I was a very young age, Shopping, Grocery shopping for myself, Starting companies. I just was... I went and lived as a Mormon missionary for 2 years in Argentina and washed my clothes, The mud off my clothes in a bucket with my knuckles. And I was just very young. I was... Put into positions of responsibility. So having a kid at 23 honestly felt like. No big deal.

01:08:57
Harry Stebbings
What does great fatherhood mean to you and how has your style of parenting changed over time? Now, You know, How's that changed in terms of what being a great father means?

01:09:10
Erik Allebest
Yeah, I'm learning still every day what it means to be a great father because it's different a little bit for each kid. I really. Try to meet my kids where they are and see the best in them. I think that some kids are easier to parent with certain styles than others. Some kids are more compliant, Some are more willing to please. My older two kids were easiest in some ways, And my younger two who are still at home. I have different challenges and I'm learning there, But like, I'll give you an example for my 15 year old son. He's so incredibly bright. But he really doesn't love to have people tell him what to do. That includes, You know, But his sister's got, You know, She drives up out the door at eight o'clock to go to school.

01:09:55
Erik Allebest
But he doesn't want to be woken up. He doesn't want to be bothered. And so we finally said, Hey, Like, All right, We're not going to set an alarm for you. We're not going to, You know, Take money from your bank account. If you're late, We're not going to do these things. Just good luck, Man. Good luck. So if he misses school, He's got to Uber to school. He's got to figure it all out on his own. And that actually makes him happy rather than bumpers down the bowling lane. He wants maximum freedom with maximum consequences. All right.

01:10:28
Harry Stebbings
Did kids not need structure? No child wants an alarm clock. Of course they don't. No one wants to get up. Generally speaking, It's human nature to be inherently less alarm ready or whatever we want to call it. Like, Do you not need to do, Educate me, But do you not need to instill those guardrails?

01:10:46
Erik Allebest
Some, It works well, It works well for some kids who understand that. And there's a little bit of friction and, You know, You kind of help and over time they see and do those things. And that is true for some personalities. For other personalities, Sometimes the best thing is just to get out of the way and let life take its course. So I'm not trying to say either approach. Eric Allebest is very kid dependent, But the more I tried to structure for my son, The worse outcomes he had. It was counterintuitive because it worked with my other kids and didn't work for him. And so I had to change, You know, My wife and I had to change strategies there.

01:11:23
Harry Stebbings
If you could call yourself up, Eric, The night before you became a father, When you were 23. What would you tell yourself? You've got 22 years of wisdom now, And you can say, Eric, You should know this. What would you say?

01:11:36
Erik Allebest
Oh, Man, You're going to make me emotional here. I think be really attuned to that ratio of positive versus negative. When you're a kid, You feel the negativity from authority. You feel the wrong that you do. You feel when you mess up. You feel when you disappoint. You feel also heavy. And there's so much of it. You're getting so much correction in life. You're getting so many negative moments. And a lot of it's in the world. And if you're making your home also a place of negativity, A lot of kids just want to check out because they can't handle the negativity. So just trying to make home as positive as possible and have the most positivity. So that when there are those corrective moments, You have a lot in the bank. And I wish, You know, Just you cannot do enough.

01:12:23
Erik Allebest
There's there's no too much. Just do more and more.

01:12:27
Harry Stebbings
Did you have negative too much negativity in that proportion?

01:12:31
Erik Allebest
I think there were times and periods or certain areas with each kid where you really want the best outcome for them in this thing. And so as a parent, You you fixate on it and you try to. I want to fix this. I want to control this. I want to adjust this. And it turns into a lot of negativity. And you end up sometimes creating more problems than if you hadn't fixated on it and you had just left it be. And I can think for each of my kids, Different moments or things where I was really trying to control or guardrail or convince or do that.

01:13:05
Erik Allebest
And ended up in some ways causing more damage than if I had just kind of let if I had shown more love and just kind of given them the time and space to get there rather than try to. You know, Make it happen.

01:13:19
Harry Stebbings
Speaking of like making it happen, I interviewed Harley, You know, The president of Shopify, And he said that when it came to marriage, The most important thing is actually not to provide a solution and is actually to make the person feel heard, But not come in with, Well, We can do this and this. When you think about lessons on what it takes to have a great marriage, What are some of your lessons there?

01:13:45
Erik Allebest
The greatest thing you can do is validate. And listen. And then when everybody feels validated and safe and heard and comfortable and like down to baseline and safe, Then only then can you have productive conversations around policy or decisions or different things. But most people get into escalating fights and arguments about trying to feel heard and validated. And if you can be the person in your relationship, When there's tension to just stop and say. I'm setting my issues aside and I'm going to listen to this person as a human and what their needs are and what's driving them and what their feelings are and listen and say, I hear you. That sounds hard. I understand that makes sense. I feel that you help that person then feel safe as a person.

01:14:39
Erik Allebest
And then hopefully they'll take the time in their turn to then listen to you and do the same for you. And then when you come together, Then you can start. Possibly then or later to work on solutions to the problems because there are there can be real problems and just validating feelings doesn't solve problems but you have to start there.

01:14:58
Harry Stebbings
Have you always shown the true full extent of yourself? If we're honest i don't show the full extent of myself because if you knew what i was like you would leave. Like. I guess that's human nature, Like.

01:15:12
Erik Allebest
It's not my nature, If I'm honest.

01:15:15
Harry Stebbings
So you show the darkest depths of yourself.

01:15:18
Erik Allebest
I don't feel like a dark person. I feel like a needy person sometimes. I feel like a-. Confused person.

01:15:24
Harry Stebbings
Do you feel the need to always be strong?

01:15:26
Erik Allebest
People love like reality. People love vulnerability. People love self-deprecation and humor and just like real people love real. It's always been who I am. I don't have the. I haven't had the drive to do that. And I think I had a safe home. I'm not a perfect person and I make a lot of mistakes. I have character flaws for sure, But. I try to lead with humility and with like, You know, Acceptance of who I am and who everybody is. And I've found that's created really great relationships.

01:16:03
Harry Stebbings
If you ask Keith, Keith will probably tell you that. I work a lot, Like a lot, A lot, Seven hours, Seven days a week and far more than is healthy. And I don't have kids. I. Because I worry that I will be mediocre if I have anything else. What would you say to me?

01:16:22
Erik Allebest
I think that make, I understand that. I think, I don't know if my dad's going to watch this, But I think my dad does that a little bit. I think he works to just not have to listen sometimes to some of the things that are maybe haunting in there. I have that at times too for myself. Like I am a compulsive cleaner. Like I, Like you came to my house, You'd think the housekeepers were there, But I clean a lot because it puts me in a, In a, Both in a zone. I'm going to stop. Here.

01:17:14
Harry Stebbings
Glossed over through work and I say that as I'm also talking to myself as I say that the kids make you better at what you do like Marcello Claw from Softbank said that actually post kids he had a reason to fight like he had kids to feed he had you know a. Family to build and other people are much more candid and say no they don't you if you're going to be a great parent it takes away from work but. It fulfills you in other ways. Which side are you on?

01:17:43
Erik Allebest
I mean, Parenting is fulfilling for sure. And. Does it mean that you can't be as good at your job? Do you have to make choices between those? I would say some people probably do have to make choices. But I will tell you that my situation, And again, This goes back, I am home when my kids leave in the morning. And I am home when they come home. And even that's partly working from home allows me to both put in a lot of work and hours over the week, But also be around and my kids can feel me there. I think people who have to do the grind to go out and they're traveling a ton or spend a lot of time in office, I do think that they may end up sacrificing some of their family. Six or whatever fulfillment.

01:18:36
Harry Stebbings
The kids are like, God, I wish dad went to an office. I'm sure that's not the case. And I totally get that. Dude, I so love this. I want to do a quick five. So I say a short statement and you give me your immediate thoughts. Does that sound okay?

01:18:53
Erik Allebest
Let's do it.

01:18:54
Harry Stebbings
Okay. Do you remember when you became a millionaire?

01:18:57
Erik Allebest
Yes.

01:18:58
Harry Stebbings
When was it? And can you take me to that moment?

01:19:00
Erik Allebest
When I sold the second business. And I had a. I had a seven figure. Bank statement. I remember it.

01:19:09
Harry Stebbings
How old were you? Did you feel happy?

01:19:12
Erik Allebest
Yeah, I did.

01:19:15
Harry Stebbings
There we go. Does money make you happy?

01:19:17
Erik Allebest
I think achieving things makes me happy. I'm very achievement-oriented, And that makes me happy. And can money be a signal of that? It can.

01:19:27
Harry Stebbings
What have you changed your mind on in the last 12 months?

01:19:30
Erik Allebest
I've changed my mind in the last 12 months a little bit around parenting, As I discussed earlier. I thought the guardrails were more important. For everybody than they are. And I don't know that they are for everybody. And some kids need to just jump out of the nest, And that's okay.

01:19:52
Harry Stebbings
What scares you more than anything else?

01:19:54
Erik Allebest
Dying. Self-related issues. Not being able to exercise. Anything around physical unwellness.

01:20:01
Harry Stebbings
Why does dying scare you?

01:20:04
Erik Allebest
Revenue M Members and People All with. The future is so exciting. Don't you want to see it? Like, I mean, Society is evolving at such a crazy rate. It's like not being able to see the end of a movie. It's like, I just want to see where it goes.

01:20:19
Harry Stebbings
No, I'm scared of dying because I'm worried about being forgotten in nothingness.

01:20:24
Erik Allebest
I am. That's inevitable, Man. Like, No, I'm not worried about that. I understand that. I understand.

01:20:30
Harry Stebbings
What's the kindest thing anyone's ever done for you?

01:20:33
Erik Allebest
My wife saw through that kind of. I don't know. Why that's such a hard question.

01:20:59
Harry Stebbings
I would have dinner with Bernard Arnault, You know, The founder of LVMH. I'm just fascinated by how he thinks about brand, Social status tied to money and items. And I don't think anyone understands marketing like he does, Or fashion, Or self-worth, Actually. He ties self-worth to very material things.

01:21:22
Erik Allebest
I'll join you in that dinner, That does sound fascinating.

01:21:25
Harry Stebbings
What's your most controversial belief, Penultimate one?

01:21:28
Erik Allebest
Probably that nothing actually matters. And. 10 years time,

01:21:39
Harry Stebbings
Final one. Where's chess.com then? This is 2034. Where's chess.com then?

01:21:45
Erik Allebest
In some ways I hope I don't know because. I haven't thought about it in, You know, A couple years. Just kidding. I may be there in 10 years, May not. It's pretty stressful at times. So there's times where I hope that I don't think about it in 10 years. But I think chess will continue to be a big part of people's lives. And I think that in this world of exploding possibilities and a new, You know, There are dozens of game studios creating new games every single day to launch and do this and do that. And there's we're in a world where there's more songs are being written and more content is being created. You know. More things are being done. People go back to the classics and for a little bit of just like safety. I mean,

01:22:31
Erik Allebest
My kids listen to music from generations past because there's something that's like just. Eriko Tsubasa, Eriko Tsubasa, Chess will be the fallback of the greatest strategy game and most interesting thing forever and maybe even more so as there's even more proliferation of gaming.

01:22:53
Harry Stebbings
You have some very misadjusted children if they're not listening to 20 vc but it's a very wise move to listen to some of the greats. Eric, You know, I was told this would be a special one. You saw it before when we posted on LinkedIn. I've loved this. Shows like this are why I love doing what I do. So thank you so much for joining me.

01:23:13
Erik Allebest
Thanks for having me. It was a joy to talk with you. I appreciate your questions and many of your pushbacks and your insights. It's been great to dialogue. Thank you so much.