Thirty Minute Mentors Podcast Transcript: Interview with Electronic Arts Founder Trip Hawkins

I recently interviewed Trip Hawkins on my podcast, Thirty Minute Mentors. Here is a transcript of our interview:

Adam: Our guest today is one of the greatest entrepreneurs of our time. Trip Hawkins is the founder of Electronic Arts, the second largest gaming company in the United States and in Europe, with a market cap of over $30 billion. A pioneer in the industry, Trip is widely credited with changing the way video games are played. Trip is also the founder of 3D audio and Digital Chocolate, and is an advisor to a number of emerging technology companies. Trip, thank you for joining us.

Trip: My pleasure.

Adam: Apple was founded in 1976. You joined in 1978, and stayed for four years before leaving to start Electronic Arts. What were the early days of Apple like and what are some of the best lessons you learn from your time there?

Trip: When I got there, it was still kind of a little hobby business. It had only recently gotten its first investment, cash, and the company had about 25 guys in a back room. They were assembling a couple hundred extremely expensive hobby machines that you couldn't really make any software for because we didn't have a storage device yet to store the software or to get the software into the machine. And then the entire office staff was another 25 people so it was a very small, intimate group. And I worked all four years, very closely with the founders. I was the guy that was put on the point to open up the business market. I kind of led the company on a meaningful pivot from thinking that the business market meant just small businesses buying accounting software. I checked that box. But I recognized that there was a much easier market of, you know, office professionals that wanted to have a desktop solution that, you know, did office things like spreadsheets and word processors, and I brought the first spreadsheet into Apple. Among other things, I brought the first mouse in or had had one of my staff do that for me. But I was really there at the beginning of it all in terms of having us commercialize the industry and develop the markets that the PC is known for, and then to develop the user experience that still exists today after an industry standard.

Adam: What are some of the best lessons you learned from your time working at Apple?

Trip: Well, one day, Steve Jobs told me that I was really creative. And I hadn't really thought that up to that point in my life because my parents were not the kind of people that wanted to dole out a lot of praise. They thought it would go to your head. And I hadn't really thought about it. I thought, hey, if Steve Jobs thinks I'm creative, I must be creative. He would know. And that was a, you know, a game changer for me. It just enabled me to settle into a feeling of confidence that the ideas that I had about the game industry, which I'd always since childhood, planned to exploit that, yeah, that I could probably do what I was planning on doing. So that was a big deal at that moment. And he was for me, a great colleague and a very inspirational person to be around in general.

Adam: Can you talk a little bit more about Steve Jobs? I know you give a talk called “How to be the Next Steve Jobs.” What are some of your favorite memories of working with Steve Jobs and what is your perspective on how someone can be the next Steve Jobs?

Trip: Well, I'm a big believer that you have to be willing to imagine what other people are saying isvpossible. You also want to think long term, not short term, you want to figure out okay, what's, what's the technology going to be able to do in the long run? And what's the right way to design how we use it? And what are the right markets to develop and in what order and if you learn strategy, you're going to be much better off. And there were many great strategic thinkers at Apple. I think of the co founders as Steve Wozniak and Steve Jobs, of course, but there's another guy Mike Markkula, who's less heralded. The business never would have left the garage and would have never gotten out of the hobby stage if it hadn't been for Mike Markkula who put the first money into the company, put together the first business plan and began to think kind of beyond the hobby market. And he became the chairman of the board and was vice president of marketing because that was the discipline that his career experience came from. And so he actually was my first boss, Steve was. I reported to Steve a little later on. But those guys were very good strategic thinkers. And it was just great to hang around them because, you know, I knew I was a strategic thinker and I really believe in hindsight, that a real key to business and to management is to figure out your strategy, and to develop that into a plan. And that's like the first step in management and leadership because if you're going to build a staff around you, you're gonna expect them to be motivated and expect them to make an extra effort and to stick with it when the going gets tough. They're really gonna need to believe in the plant, and they're gonna have to really understand and respect it. It's a viable strategy. Almost 10 years earlier than that I had figured out that I wanted to start a game company and I was figuring, I was realizing that well, people don't have computers in homes yet. And I need to wait for that. But maybe in the meantime, I can actually help with that. And I was actually actively looking to learn how to run my own business, and to help put computers in homes when I picked Apple as the place where I wanted to work. And it was a really dynamic environment. A lot of really smart, really talented, really passionate people. It helped underscore a belief I had already developed about the importance of organizational culture. And the funny thing is the founders weren't really very deliberate about planning and organizing, organizational culture. It's just that they were doing so odd, so crazy, so out of the mainstream, that the only people that we could attract in the first few years were like minded pioneers that were crazy in exactly the same way that we were. And it's kind of ironic because the company grew very quickly. So there were 50 employees when I got there. Four years later, I left there were 4000. And we went from basically being a company doing maybe one or $2 million, a year or two, doing more like a billion dollars a year. It's quite a transformation. And I got to see what it's like in organizational development and growth as you go through different sizes. And I saw the culture falling apart as more and more people came in, and you'd find that an executive was hired from Hewlett Packard or National Semiconductor, and then they would hire a bunch of their former colleagues from that company. And National Semiconductor culture was very different from HP culture, and they were both different from Apple culture. And it just didn't really work unless you really figured out what Apple did. You made sure that you were hiring and developing the culture that way and I went to the founders and I said, “Hey, you guys really need to do something about this.” And I proposed some things that could be done. And someone hilariously, they said, “Trip, that's a great idea.” Good. And so I actually did do that the last few years that I was at Apple, I helped formalize a written culture for the company that, you know, all the employees became familiar with. And it was kind of presented to all new employees. And then something else that I did just to help onboard new employees, again, there are thousands of them, we'd have a whole roomful of new office workers in Cupertino every Monday. And I would give a talk, kind of help them understand what we're doing, why we're doing, how we're doing, what our values were. And I carried that experience I had with Apple and Apple culture into what I did at EA.

Adam: You left a very promising career path as an executive at Apple to take a big risk. It sounds like you knew you were going to start your own company. You left at a moment where you were ready to start your own company. Can you talk about why you left at that very moment and what advice you have for listeners wrestling with whether they should leave their careers to start their own businesses?

Trip: Well, I pretty much knew starting around 1970 that I wanted to start a game company. I just knew I couldn't do that yet. And in 1975, it was a summer job that I had in Santa Monica, between years of college, and one of my colleagues came in after he'd been out to lunch. He told me something kind of astonishing. He said he'd been in a retail store, where you could rent a computer terminal. In other words, a screen with a keyboard that you could use to use a dial-up modem to use your telephone line from home to talk to your school or corporate mainframe company. You know, we were doing time-sharing. Anyway, he said that, yeah, you could go to this retail store, you could get one of these terminals and run it for $10 an hour. Of course, that's too much money. I mean, you wouldn't want to do that for a long period of time. But even so it's like, wow, retailers are doing this. And then my colleague, Paul Cudahy, he then added, “Hey, that's nothing. This company Intel just announced that they've got an entire computer system working on a single chip.” I went back to my desk and took out a piece of scratch paper. I started scribbling on it and asking myself, okay, if this is where we are now, how many years is it going to take where there's enough access to computers in homes that I can start my game company? And I kind of noodle that out and modeled it, and I decided that the answer was 1982. I decided it would take seven years, of course, ironically, as early as 1980, because Apple was growing very fast. There were some fledgling little cottage industry hobby shops making a few games here and there. It wasn't very professional. Some of the games were sold in plastic baggies on a floppy disk. I was hanging on a hook in a computer store. But basically, I was kind of on schedule to do this. And when 1982 rolled around, I was ready to leave Apple and I left Apple just as I had planned and started Electronic Arts just as I planned.

Adam: EA disrupted the gaming industry. How did you pull it off? What are some of your best lessons from building, growing and scaling?

Trip: Well, I had been taught and I had experienced the fact that business is much easier if your company has a big idea. And that's something that's kind of a breakthrough that not only establishes you as being different from your competition, but it's a powerful enough concept that you can really build a meaningful company around. And it was from working with brilliant software engineers at Apple and noticing how creative they are. It helped me understand that they're a type of artist. And of course, some of them had diva personalities. I began thinking about what it was like to work with these guys and what successful collaboration required. And I realized through that process, that basically, the computer was becoming a new medium. And like any major new medium, it was going to be an art form. And that's what I could do with my new company, was approach the industry as if I was going to be making a new Hollywood and I knew that nobody else was doing that. So this is a radical idea. And I thought, yeah, you know, an engineer that is going to develop this software is really a software artist. That's a really fresh different idea that will appeal to a lot of the creative talent and information strategy because it basically means that what Electronic Arts has to do is to figure out the services and resources that it needs to be able to provide to match up perfectly with that creative talent. And of course, that included no key insights about the fact that the tools that developers had at that time weren't very good. And just like a musician wants access to a studio, we had to put together a studio initially as a suite of software tools that would run on your machine. But we also wanted to make it run on a better machine than just something like an Apple two, that is something that a kid in a spare bedroom in a suburban home is using to make an Apple two game. You know, you want the tools and the machines that you're working with for development to be more powerful than the target machine that it's going to run on for the customer later. So again, I think we were the first company to realize that that needed to be done and that we could turn that into a competitive advantage. Meanwhile, I also chose to do something nobody had done in the PC industry, which was to sell the software directly to the retailer. What everybody was doing up to that point in time is they were selling it to a distributor and then the distributor would service other retail stores. And once I realized that I was building a new kind of Hollywood, I started reading books about Hollywood, I started networking and talking with people from Hollywood. And one of the things I noticed is that, yeah, they really have a presence at retail, they go out of their way to cultivate the retail relationships and make sure that their merchandise is presented the right way, and that they really get close to the customer and kind of know what customers want. And I realized that yeah, that that makes a lot of sense. And if you have stronger distribution because of that, then it's just yet another reason for the best artists to pick you or for that matter, later on, for organizations like the NFL, to be willing to give you an exclusive. So those were all key ideas that were all there from the very beginning. And some of them were, I would say, valuable and successful ideas right from the beginning. Things like direct distribution and building that pipeline, which over time, came to have tremendous strategic value. It was really difficult and really annoying. And it was a three-year process. But that was partly because, in addition to knowing what Hollywood did, I already had been through this experience at Apple. When I started at Apple, we had six distributors who were in different regions, and we shipped products to them. And then they couldn't keep up with the demand because they were just going to a local bank and financing the inventory by basically telling the bank that, “Hey, look, I've got these receivables who that sold computers to these retailers and they have to pay me and then I've got more machines I want to buy from Apple.” Well, you loaned me some money in the bank, they make you say, “Okay, I can, I can use your accounts receivable as a collateral.” But you can only borrow maybe half of the amount of your receivables. So what that did is it created a limitation on how fast those distributors could grow. And after a few years of this, we realized we really needed to go direct to resale. And it was a massive cluster making this transition because in one day, this was around 1980. Apple went from having, you know, six customers to having over 3000 and a lot of those 3000 were mom and pop retail stores. So it was a very difficult transition. The distributors weren't happy about it. Some of them sued Apple. Apple ended up acquiring a couple of them to kind of smooth things out. So it was quite a dramatic distraction. And I knew that was what Apple needed to do I senses that's what he needed to do. And I said, “Well, he is just going to do it right from the beginning.” And then it turned out to be painfully difficult and it really took three years to get it to work.

Adam: You personally produce and design John Madden Football and the EA Sports brand. Can you talk a little bit more about how you were able to sell to the leagues and bring aboard key personalities like John Madden?

Trip: Now this is really where it all started. I was a kid. I liked team sports, played baseball and football. I watched those sports on television. I think in hindsight, that was the beginning of me noticing that I was really good at strategy. And I really liked it. And of course, I also discovered that I liked statistics, and how statistics would inform what you do with resources and how you manage your tactics and strategies. And also, those sports involve heroism. And it's fun to be the hero. So my interest in games kind of came from games or card games that were trying to achieve any kind of simulation of sports like baseball and football. And back in the 1960s, there were some pioneers that invented these games that had cards and charts and dice and stuff. And basically, it was kind of like D&D, which is also very, very geeky and involves a lot of dice and charts and looking things up and you're basically managing a whole bunch of information as if you're a computer. And it's basically a bunch of cards and table lookups. And, you know, you're the one who's really the computer, you've got to keep all that organized. So I just fell in love with that and love that experience. But I noticed that most people thought it was too administrative and too much work just to operate the game. Of course, we've seen the same thing with the difference in the market size of pure original Dungeons and Dragons versus the modern marketplace for role-playing games and all the derivatives. You're looking at 10s of billions of dollars, and hundreds of millions of players today in these games that are able to present themselves really more like a live television broadcast of a sporting event with you know, characters. And that's what I envisioned, you know, so even as a kid I'm thinking, you know, I can't seem to get a lot of my friends to do it this way. And I would watch them drift back to watching television. Now, I think I find television boring, but they find it engaging. So maybe what we need is to put this in a computer and present, you know, pretty pictures on a screen like television. And that's pretty much what I then, you know, I set my sails and my heading, and I went in that direction. And I've been doing it ever since.

Adam: How do you deal with games that fail? You could spend $200 million on a game that goes bust, how do you explain that to employees? How do you explain that to investors? How do you deal with failure?

Trip: Well, if you are running a mature business that has that established formula in high volume, you may choose to run that business very cautiously and just crank out the money. But if you are innovating, you actually have to try to do things that have not been done before. So you're going to make mistakes. So you actually really need to have resilient people that are courageous enough to push the envelope and try new things, and that can bounce back pretty quickly from failure. And some people, I would say, are somewhat more naturally able to activate those kinds of skills. There are other people that, you know, maybe they had a childhood environment that helped toughen them up and help them activate their toughness and maybe put them in situations where they had to get up off the floor a bunch of times and keep going. And that maybe would help someone develop some resilience. Of course, you know, these are topics that in modern thinking, design and teaching around emotional intelligence, there are, there are practices that we know work, and people can be trained on them and, you know, start committing them as a habit and then over a period of time, you get better at it. But at least today, I think you necessarily bet throughout my career and even now, when you're hiring people, that you are looking for these kinds of traits and people and building that around your culture. And I always would tell employees that we expect you to make mistakes. And in fact, if you don't make mistakes, you're not trying hard enough. So you'll feel like oh, okay, rewarded if I innovate and push harder, and failures are okay. And I'm not going to be punished for it. And in fact, I made it very clear that, yeah, you know, mistakes are okay. On the other hand, we also want to learn from mistakes so that we don't just keep making the same mistake over and over again.

Adam: What are some of the things that people can do to become better innovators? And what are some of the things that people can do to become better leaders?

Trip: You know, again, creativity is something that, you know, we all have it. I mean, there's a lot of capacities we have that are dormant, and they haven't activated yet. We don't know that they're there. And nobody's really encouraged us to develop that tool. You know, for example, humans are really tough. You know, if you think about any human that's alive today, their genetic ancestry has spent about a million years evolving to get them here. And everybody's been through a lot. I know some people have been through a lot more challenging circumstances than others, but that's just my experience with humans is that we are all tough. But, you know, sometimes people get pampered in childhood, and they lose track of the fact that they have that capacity, and they're too likely to maybe whine and complain if something gets tough because they came out of a family where every time they whine and complain, somebody else fixes something. And you know, you clearly need to dig deeper than that. And, you know, people need to realize, hey, I can handle this. Now I've got the ability to do this and I don't need all that much help. It's amazing how talented human beings are and how adaptable we are. And I think half of human development is just recognizing the aptitudes and abilities and tools we have and being willing to basically embarrass ourselves a little bit while we're practicing. You know, and as we learn and develop and refine those tools.

Adam: What was your daily routine while you were building and leading your companies?

Trip: Well, people would always ask me, “So Trip, what do you do?” And I would say, “I do everything I can't find somebody else to do.” So I'm a big fan of hiring great people. I'm a big fan of hiring people that are better than me at what it is I'm hiring them to do. And I'm also a big fan of developing people to the point where I can delegate work to them. And, you know, I have always been the keeper of the culture and I've always stayed really closely involved with the HR function because I wanted to make sure everybody was getting stock options and everyone knew that the compensation system was fair. And so that ownership is going to make them work that much harder. And, you know, when you think about success, you might ask successful people, well, what was the key to your success? I actually think it's effort, and what happens is that talented people go off to try to do things. And if it's a risky thing to do, it turns out to be harder than they expected. Or it requires years of practice, there are hundreds of times when that person will think about quitting. And if they're not doing something that's kind of consistent with their identity at a deep level. If it's not something they're really passionate about, then they probably will quit. You know, if you're properly aligned, if you're really doing something you believe in, that you never get tired of, then all those times you're tempted to quit, you're more likely to stick with it. And if your strategy is right, and you're really going in the right direction, and you're kind of objective about reality, then you'll likely succeed.

Adam: Trip, where do you see gaming in five years? I would love your thoughts on the opportunity and timeline around emerging platforms like AR and VR, thoughts on growth and contraction of mobile console PC and what types of games you see dominating in the future.

Trip: I think there's some great themes right now that are growing, starting with the fact that all the younger generations are gamers. The population of computers is in the billions. It's in the 10s of billions. So everybody's got access to devices. Everybody's got access to the internet. And they're all growing up now as digital natives. And they see it very much as a social platform. So it's far more common these days that the modern gamer is in fact playing with real people. And gaming is a little bit like a Facebook social platform, except it's a vertical market. You know, it's around playing games. And you've seen with games like Fortnight that when you make the game more accessible, a much wider audience will get involved. And I think you know, Fortnight showed some breakthroughs about how to do this by making it a cross platform game. That's an emerging trend. And it created a virtuous cycle where somebody might try it first by just downloading and on their iPhone. And then they would notice they're in a battlefield, getting their ass kicked by somebody on an Xbox and somebody else on a PC where they had more precise control and a bigger screen. And maybe then they decided to go buy an Xbox. And instead of the mobile device competing with the console, they're kind of nourishing each other. And of course, there's a lot of services like Twitch and YouTube and eSports that AR and VR that are there based on the PC primarily, that keep the gamers engaged with their PCs even if they also have constant contact through mobile phones. So the market’s definitely growing, we're still expanding the penetration of smartphones throughout the world. And, you know, the internet keeps getting better, the mobile internet, we're about to jump to this new set of capabilities called 5G. So it's all getting better. And then there are these other themes that are very exciting. So I think social gaming is in a very nice vein for a lot of innovation and growth. eSports is a good example of that where you've got multiple players playing against each other, but then you have a huge viewing audience. So I think that's an industry segment that's going to grow by leaps and bounds. Now you brought up virtual reality, I'll tell you this, I don't think anybody understood augmented reality until Pokemon Go. And Pokemon Go to me is a smarter way of thinking about it because it uses a regular smartphone and it adds location information. Then it's built around a clever brand that, in this case, you know, was already established. So I think there's plenty of opportunity for growth in augmented reality. And of course, mixed reality is a cousin of that. As far as more conventional virtual reality is concerned, I think it's a ways off. I think you have to remember that the gamer is mostly either mobile, or they're at home when they're playing. And they probably need to be consciously aware of what's going on around them, whether it's on the bus, or the train, or the street, or if they're home, and they've just got their feet up on the table while they're relaxing on the sofa. So I don't think VR has quite the appea I think it does because it continues to be too expensive and clunky and a little bit hard to use. But more than that, once you put essentially the equivalent of a helmet on, you know, if you've got goggles on and other things that are basically taking you really into a rich fantasy world, they're also disconnecting you from the real world. Which means if my phone rings, I don't even know where it is, if someone walks in the room and wants to talk to me, I, you know, I've got to take the thing off, it interrupts everything. But overall, I think, you know, from an overall standpoint, there's all kinds of favorable winds right now. And the tide is rising, and it's gonna lift a lot of boats in the industry in the next 10 years.

Adam: Trip, thank you so much for all the insight and advice and thank you for joining us.

Trip: Good luck.

Adam: Thank you Trip.