CEOInterviews.AIreCAPTCHA and Duolingo: Luis von Ahn (2020)

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Narrator0:00

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Guy Roz3:44

Hello everyone. And you know, over the many years of doing this show, we've come to learn that there are certain episodes that just resonate with a huge number of people. And this one happens to be one of them. We first ran this back in 2020. And be sure to listen through to the very end to hear a quick update. And now here it is.

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Luis Von Ahn4:06

You know, I was feeling good. I thought, okay, well, we can continue raising money for a while. And at some point we raised money from Google. Capital G is one of their investment arms. And the partner from that firm sat me down and she said, 'Nobody else will invest in this company if you don't figure out how to make money. You know, you're not going to find a bigger fool.'

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Investor4:29

We're the biggest fool.

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Luis Von Ahn4:31

And that's when we started kind of freaking out and trying to figure out how we're going to make money. But we had no idea how we were going to make money.

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Guy Roz4:42

Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Roz and on the show today, how a perfect storm of skill and luck drove Luis Von Ahn to create Captcha, then Recaptcha, and then Duolingo, a foreign language app valued at $1.5 billion. Think about the small moments or decisions in your life that actually had a huge impact on how your life turned out. Maybe it was a conversation you struck up with the person next to you on an airplane. Maybe it was a party you reluctantly went to only to meet the person you'd eventually marry. Or maybe it was a decision to stay on vacation an extra day that sparked a new idea. For Kevin, it was a random remark from his girlfriend that made him decide to use filters on Instagram. For Blake Mycoskie, it was a chance meeting with a group of young Argentinians who took him to the countryside where he saw kids with no shoes that one day inspired him to create Toms. And for Luis Von Ahn, it was a free lecture at Carnegie Mellon University in 2000. That single lecture would lead him to invent two ingenious new tools. The first was captcha. Yes, captchas. Those annoying, twisted, and blurred letters you have to type into a website to prove you're human. And the second one was Duolingo, now the biggest language learning app in the world. Both Captcha and Duolingo were designed to harness the power of crowdsourcing to solve problems. And I'm going to blow your mind here. If you have ever typed in a captcha or used Duolingo, there's a good chance you've taken part in a massive online collaboration that you probably weren't even aware of. And it's amazing how Luis came up with all this. But let's start at the beginning. Luis was born in Guatemala in the late 1970s. Both his parents were doctors. And though he was surrounded by poverty and violence in Guatemala City, Luis grew up in comparative privilege. And as a kid, he spent a lot of time hanging out at the family business.

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Luis Von Ahn7:06

My mother's family actually had a candy factory. Everybody is always amazed at the fact that I grew up with a candy factory and, you know, they think that and it was like Willy Wonka or something. I was not all that much into the candy itself. I was into the machines because basically the candy is made by these gigantic machines that, you know, pump out I don't know how many thousands of pieces of candy per hour. And basically all my weekends I spent playing at the candy factory and I would take the machines apart and put them back together. There would be some extra pieces after I put them back together usually and that would be a problem.

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Guy Roz7:40

What kind of student were you? I mean were you was school pretty easy for you?

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Luis Von Ahn7:44

Yeah, I was pretty nerdy basically. I was really good at math. Math was just easy to me. I know what I would do during in the summers is basically get either next year's or you know couple years later math books and basically do all the exercises. It kind of came easy but the way I really got good at it is by doing hundreds and hundreds of exercises.

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Guy Roz7:59

Wow.

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Luis Von Ahn7:59

It kind of came easy but the way I really got good at it is by doing hundreds and hundreds of exercises.

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Guy Roz8:04

That's what you would do in the summertime.

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Luis Von Ahn8:06

Yeah. I kind of was bored. I mean I was an only child. I didn't have that much to do. This is remember this is also pre-internet pre everything. So what was I going to do?

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Guy Roz8:15

Man, that's what I was putting playing cards in the spokes of my bicycle and buying Jolly Ranchers at 7-Eleven. Woo. Should have done math books. So, you were Did you just love math? I mean, was it It sounds like kids don't think about their future. They're not like, 'I'm going to study math so I can be in tech one day.' Like, you must have really enjoyed it.

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Luis Von Ahn8:35

I did. I enjoyed it. It was like a puzzle for me. By the way, this is not the only thing I did. I mean, I also played a lot of video games, pirated video games in my Commodore 64, like floppy discs. Floppy discs. Yeah, that's right. I wanted a Nintendo when I was eight. My mother would not get me a Nintendo. She instead got me a computer, a Commodore 64, and I couldn't figure out how to use it, but eventually I read the manual and stuff and I figured out how to use it more. And then I figured out I could pirate other people's video games. And so I became a little hub in my neighborhood. But these were not other kids. These were adults or basically young adults who had a computer and they would come to my house and I would take their games and give them my games in exchange. So I collected a pretty large number of video games.

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Guy Roz9:23

But I should mention right that I mean because your childhood sounds pretty nice but like as a kid I guess or even as a teenager there was a civil war in Guatemala, right? I mean, we know that today there's a lot of violence there and obviously there's violence in the US and other countries, too. But Guatemala has been particularly hard hit. I mean, did it feel dangerous when you were a kid?

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Luis Von Ahn9:44

Yes, it did. There was a civil war pretty much since I was born in 79 to 1996. There was a civil war going on the whole time. It always felt dangerous. When I was 15 or so, my aunt was kidnapped for ransom. I mean, she was gone for seven or eight days. Wow. People's cars would be stolen. I don't know, every couple of months, somebody's car would be stolen in my family. Going out past 7:30 p.m. was rare. You needed to go out in a large group if you were going to go out past 7:30 p.m. And, you know, my house had walls and barb wire. Yeah, it felt dangerous. I mean, this is one of the reasons I came to the US, actually. I mean, you know, when I was after my aunt was kidnapped, I thought to myself, I don't want to live here.

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Guy Roz10:29

Yeah. And I guess you did end up leaving Guatemala for college because you went to Duke in North Carolina and you described yourself as a math nerd in school and is that what you intended to do like to do something in math?

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Luis Von Ahn10:46

That's what I wanted to become a math professor. I was pretty certain I wanted to become a math professor. You know, at the time I thought the best thing that I can do is really learn a lot of math. And I really loved it. And I thought it was futile to learn how to deal with other people. And it is interesting because my job these days is 100% just dealing with other people and people's problems.

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Guy Roz11:09

Wait, I'm just trying to understand this. So, by becoming a math professor, you thought, hey, I wouldn't have to deal with people. I would just deal with like facts and data and numbers.

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Luis Von Ahn11:17

Yes. Yes. And you know, I'll do math research all day long. And every now and then I'll teach a class, but whatever. That's like a tax. That's what I thought.

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Guy Roz11:25

So, all right. So, you get your degree and you're following this path to go into academia and you go into a PhD program at Carnegie Mellon, correct? And I guess you go into computer science, right?

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Luis Von Ahn11:37

Yes. I changed from math to computer science because I visited a math grad school and what people were saying, the professor was saying, 'Oh, I'm working on this open problem that nobody has been able to solve for the last 300 years.' And I thought hmm, I don't think I'm smart enough. I mean if you haven't done it and nobody's done it in 300 years that's kind of not for me. Whereas when you visit in computer science I mean this is crazy thing people are like oh yeah I solved an open problem yesterday. Wow. It's a much younger field and so that I thought that was much more exciting for me at least.

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Guy Roz12:07

So you start this is year 2000. You start your PhD program at Carnegie Mellon, but I guess like really soon after you start you go to some talk by someone from Yahoo comes to campus to talk about Yahoo. Yahoo is a big deal in 2000. Is that the story?

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Luis Von Ahn12:25

Yeah, that was serendipity again. Most of the things that have happened in my life are serendipitous. I was a first year PhD student. I had been at Carnegie Mellon for maybe two months. I had you know the first thing you got to do when you become a PhD student is find an adviser. I had found myself an adviser and we went to a talk together this guy from Yahoo who was the chief scientist of Yahoo at the time and like you said Yahoo at the time was the biggest tech company out there and he came to give a talk at Carnegie Mellon and it was the talk was basically 10 problems that they didn't know how to solve at Yahoo and I was an enterprising PhD student and I thought I'm going to try to solve these problems.

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Guy Roz13:01

And what was the problem that he said they had?

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Luis Von Ahn13:04

Yeah. So the problem for this particular one was there were people who were writing programs to obtain millions of free email accounts. Okay. So Yahoo at the time gave out email accounts for free. And some people thought it would be good to send spam from Yahoo accounts. The problem is each Yahoo account only allowed you to send like 500 messages a day. So if you want to send 10 million spam messages per day, you just have to get a bunch of Yahoo accounts and from each one of them you send 500 messages. And this is the era and I remember this, we all remember this where you would get hundreds of messages, spam messages about certain bodily enhancements. You would get messages about the hormone growth things. I mean baldness. I mean it was just spam. It was a huge problem. Yep. And he was like, 'We can't figure out how to stop these computers or programmers from making, you know, just creating all these email accounts.' Yep. And so that was the problem.

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Guy Roz14:06

And just to be clear, these spammers were not physically setting up each individual email account.

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Luis Von Ahn14:12

No, they had written programs that would just set up millions of email accounts a day or however many per day. So I thought about it for weeks and months and I talked about it with my PhD adviser Manuel and together we came up with this solution which was the thinking here is look computer programs can get a million email accounts per day because well computer program can do things very fast and it also doesn't get bored. Right. Humans a human can't get very many email accounts. So how about this? How about if we make sure that whatever is getting an email account is actually a human and not a computer program. Then we started thinking, okay, well, how can we distinguish between a human and a computer? Yeah. And that's where this idea came about. It's this idea of a captcha where it's basically these distorted characters that you have to type whenever you're buying tickets on Ticketmaster or getting, you know, an email account or stuff like that. The idea is that a computer can generate one of these, you know, basically take some letters, put them in an image, distort them, and then it can give them out. And it turns out that humans can read these. Well, at the time, humans could read these very well. They still can, but computers could not.

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Guy Roz15:22

By the way, I can't read them. I'm the human that can't read them. I can't read captchas.

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Luis Von Ahn15:26

Well, I don't know. I don't know how much of a human you are.

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Guy Roz15:28

Now they're like, point to every stop sign, point to every bridge.

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Luis Von Ahn15:32

Yeah. Yes, it's changed. But basically, at the time, the idea was humans can read these distorted characters much better than computers.

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Guy Roz15:38

So, let's give basically every time that somebody's trying to get an email account, let's give them a test to see if they're a human or not. And you just start doing this on your own like did you tell Yahoo did you tell him or were you just like this is fun I want just want to figure this out like just working independently.

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Luis Von Ahn15:53

Yeah, I mean with my PhD advisor it became our research subject and yeah we did not tell Yahoo.

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Guy Roz16:00

Because it sounds like here's the kid getting the math workbooks in the summer. It's like you just seemed like a fun thing to solve.

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Luis Von Ahn16:10

Yeah, it was fun. And but that's the core of the PhD program, I think. You know, you're trying to find problems that others haven't solved. And you're this seems like a problem that other people hadn't solved. So, we were working on it.

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Guy Roz16:22

And you called it capture. Did you name it capture? And what does that mean?

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Luis Von Ahn16:25

It's an acronym. It stands for Completely Automated Public Turing test to tell Computers and Humans Apart. So you know it was just an acronym but now I think most people have heard of the word captcha but do not know what it stands for.

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Guy Roz16:47

And you come up with this thing captcha and what do you do? Do you like email this guy Yahoo and say hey I've got your solution for you.

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Luis Von Ahn16:54

Yeah basically. I mean we emailed him and we said hey you know we think we have a solution here's some code you know and we explain how it works. And what was amazing, and now that I know how large companies operate and how slow things move, what was amazing is within about a week of when we sent them this, it was already functional. Wow. You know, alive. It was live.

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Guy Roz17:15

So, I guess the problem that they had was so big that when they saw this, they were like, 'Okay, let's do it.' So, they saw this and they're like, 'Oh my god, this is great.' And so, you must have just I mean, you were like what, 25, 26?

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Luis Von Ahn17:26

20, 21.

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Guy Roz17:28

21. My god. So, all of a sudden, you're an overnight millionaire, multi-millionaire.

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Luis Von Ahn17:33

No, no, no, no, no. Money was no money exchanged hands here.

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Guy Roz17:37

Wait, you gave captcha to them? You just said, 'Hey, here you go.'

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Luis Von Ahn17:41

Yep. I mean, listen, I didn't know how things worked. And you know, the truth of the matter is probably a good thing in retrospect. I mean, who knows what would have happened, but you know, I don't have regrets. But yes, that was what started happening. And then basically every other website started, you know, they saw that it was on the front page of Yahoo. So, every other website started copying or making their own version. And within a couple of years, pretty much everywhere on the web, you know, when you had to get an email account, when you had to enter a comment on a blog, when you had to buy tickets on Ticketmaster, you had to enter one of these.

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Guy Roz18:19

You were the guy who made it really hard for dopes like me to get it right. I had to constantly...

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Luis Von Ahn18:26

It was annoying. It was annoying for people. And every time that I would be at a party or something and they would ask me what I did and then they would get me to explain my research. I would explain that I had done that and they would say you know what the hell they would kick you out of the party. Screw you. Screw you.

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Guy Roz18:40

But some of the research you did I mean you did actually write some software that you sold for I think for some money this time. I mean just like could you just briefly explain how that happened and what you were working on?

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Luis Von Ahn18:53

Yeah I mean this is funny. I mean at the time this was not called crowdsourcing but my PhD research was basically on crowdsourcing. I had worked on captcha where the idea was that humans can do some things computers cannot. So my PhD research was basically that finding things that computers could not yet do and then finding ways to get people to do them. And in particular, the main thing that I did in that time was a game. And people love to play it, but as they were playing it, they were actually helping computers figure out what's inside an image.

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Guy Roz19:24

How did the game work?

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Luis Von Ahn19:26

The way the game worked was this. You went to a website and you got randomly paired with somebody else who had shown up to the website. Got it. And you were both shown the same image, any image, a random image, like an elephant, an image from the internet. Yes. And you were told, 'Type whatever the other person's typing. Just start typing words. And if one of your words matches one of their words, you both get points.' Got it? What was interesting about this game is that the words that people typed, the only thing they had in common was the image. So the words that people typed were basically related to the image. Because if you're told to do this, what are you going to type? If it's a picture of an elephant, you're going to type elephant because you think the other person is also typing elephant. So those words were really good labels for the image, were really good tags for the image basically. So I put it online. I programmed it. Millions of people played it. And this was a game that was helping label all images on the web. And at some point actually Google in fact bought it. They just bought the technology and then it got implemented. They changed the name from the ESP game which I called it the ESP game because it's like extra sensory perception. The idea was like try to think what the other person was thinking to the very name of the Google Image Labeler. Which is much less interesting.

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Guy Roz20:39

And so they bought this from you and was that like life-changing money? I mean, were you all of a sudden super rich?

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Luis Von Ahn20:45

No, it was not super rich, but it was good.

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Guy Roz20:48

Got it. Okay. So, you went on to earn your PhD and you get a job at Carnegie Mellon, correct? You're a young professor. You're on tenure track. And by the way, early on in your academic career, I should mention this, you were granted a very prestigious award, the MacArthur grant, known as the Genius Grant. Basically, they pick a few people a year and give them like half a million dollars of unrestricted money to work on whatever they want. I mean, it must have been mind-blowing.

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Luis Von Ahn21:19

Yeah, that was, you know, I've gotten a number of awards in my life, but I mean that was probably the most impactful one in terms of just how I felt. And also they do this crazy thing where they don't you have no idea that you're being considered or anything and they call you randomly. They figure out your phone number one day you pick up and then they just tell you, you know, have you ever heard of the MacArthur Fellowship? And you say yes and then they just tell you and you're like, wow, like what the hell? First you think it's a prank. I thought it was a prank.

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Guy Roz21:50

Yeah. And I guess like around this time too, I don't know if this is apocryphal or not, but I read that Bill Gates personally called you to try to convince you to leave your job at Carnegie Mellon and to go work for Microsoft. Is that true?

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Luis Von Ahn22:07

That is true.

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Guy Roz22:08

Like what you pick up your cell phone, it's like please hold for Mr. Gates or was he on the line?

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Luis Von Ahn22:14

It was pretty much like that. It was somebody you know basically said that please hold for Mr. Gates and you were like okay and he gets on the phone and he's like Luis it's Bill Gates here. That's exactly right. I had been an intern like a year and a half before that I had been an intern at Microsoft and so I had good ties with Microsoft and they really wanted to hire me for Microsoft research and so that is yeah Bill Gates spent I don't know 45 minutes to an hour trying to convince me to go there. I was very flattered, but you know, at the time I just wanted to do my own thing, be a professor.

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Guy Roz22:47

Did you say no to Bill Gates? What? You were like, 'Oh, wow. Thank Mr. Gates really so nice. I'm so honored, but I just, you know, no.'

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Luis Von Ahn22:55

I didn't actually say no. I said I would think about it and then I said no to like a recruiter, but yeah, it was not easy. I mean, he's a major hero of mine. I mean, he's just an amazing human being. But I just wanted to be a professor at the time. I thought I want to do my own thing. I want to be a professor. And that's what I wanted to do.

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Guy Roz23:14

Was money important to you? I mean, you know, was it important to you to...

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Luis Von Ahn23:16

It mattered. And it interestingly, I guess it mattered more than it does now. It was nice to know that, you know, I could buy a nicer car or get a nicer apartment or something. So, it was nice, but it was never my driving force, I would say.

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Guy Roz23:29

Okay. So, you decide I'm not Bill Gates. Thank you. No thanks. I'm not going to Microsoft. I'm going to stay doing this work. So, you are now were you lecturing? Were you teaching classes?

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Luis Von Ahn23:39

I was teaching a huge class. It was called Great Theoretical Ideas in Computer Science. It's just a fancy name. It's basically a discrete math class. The people who don't do well there usually change majors.

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Guy Roz23:51

And you're like not like John Nash, but I'm thinking about that movie. You're in front of a blackboard or a whiteboard and doing equations and problems in front of 250 kids.

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Luis Von Ahn24:00

Yeah. Slides had already been around, so I used PowerPoint. I got you. This is not that old.

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Guy Roz24:06

Right. I got you. Yeah, you're right. Okay. So, you're teaching and you had done captcha and lots of people are saying, 'Hey, it's annoying.' And you're like, 'Yep, I hear you.' And people kept saying that to you, like you kept hearing that.

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Luis Von Ahn24:19

Yep. Yep. And that's when I started thinking each time you do it, you waste about 10 seconds of your time. And I just started this thought came to me of wow, how much time am I wasting of humanity? And you know, I did a little back of the envelope calculation, realized about 200 million times a day, somebody types a captcha. And that's when you get 200 million times a day times 10 seconds. So, humanity as a whole is wasting about 500,000 hours a day typing these captchas. And that's when I started thinking, huh, related to all my research that I have done, is there something we can get humans to do while they're typing a captcha that is also useful? Can we get them to do something useful? And it occurred to me that yeah, we could get them to help digitize books.

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Guy Roz25:03

How did you come to that idea? So like when you type in a random letters from a captcha, you were thinking, wait, how do we have a secondary use for this? And maybe it's books, digitizing books. How did you even how did that even occur to you?

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Luis Von Ahn25:20

I was thinking for a long time, can we get people to do something but at the same time kind of extract valuable computational effort from it? Until it finally occurred to me, oh, there's all these projects out there trying to digitize all the world's books. Google had announced a really, at the time it seemed kind of insane, an ambitious project that we're going to take all of the world's books, everything that's ever been written. It's 100 million books ever written and we're going to put them online. This is what we're going to do. And now in this process, the way the process works is you take a book, a physical book, then you scan every page and then the computer needs to be able to decipher all of the words in those photographs. Now the problem is that computers could not recognize at the time could not recognize many of the words about 30% of the words computers could not recognize. And the reason for that, by the way, which is this amazing thing, is the same reason why computers could not read captchas. Basically, this looked kind of like distorted letters. And distorted letters are just inherently difficult for computers to recognize. Like that's the point of captcha. That's right. And so it occurred to me, oh wow, what if we just take the words out of a book that the computer cannot read and then we send them to people while they're typing captchas on the internet. So basically next time you type a captcha, the words that you see are actually coming from a book and whatever you enter is in fact used to help digitize a book.

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Guy Roz26:37

Do you remember when you came upon that idea? Was it like in a flash or was it just like did it occur to you like...

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Luis Von Ahn26:43

I do remember I was driving from Washington DC back to Pittsburgh because I had been to some National Science Foundation panel or something like that. Then I spent the next few weeks just kind of going over it and going over it and I thought okay this will work and I started building the system but then I recruited a guy who his name is Ben Moore. He was a maybe a freshman in computer science at Carnegie Mellon. He was one of my students. He was in my class in my large class. He was the best student and I thought you can help me build this. And so together we built a system that would take a scan of a book and extract all the words the computer could not recognize and then send them as a captcha. Now we decided we're going to go to big websites and we're going to tell them, hey look, we have this captcha service. It's free. It's better than yours. Yours is relatively crappy. This one's pretty good. And we'll give it to you for free. But all we have to be able to do is see what your users are typing during this so that we get to digitize the books.

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Guy Roz27:46

And did websites start to use this tool?

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Luis Von Ahn27:49

Mhm. Some small websites started using it. The first largest, it wasn't even large. The largest website for a while that was using us was called Online Booty Call. Nice. And they were to get an account in Online Booty Call, you had to type a captcha and it was our captcha and every time every person that was getting an account in Online Booty Call was starting to help digitize. God bless them. God bless them indeed. And at some point, a website that was relatively new at the time decided they needed to put a captcha on their registration flow. And they called us up and it was a website called Facebook.com. And they were relatively new and they were like hey listen you know we came across it it seems like you have a good captcha can we put it up? In 2007? Probably 2006, 200 yeah you know we said okay cool and they did it and that website was growing very fast and so pretty soon we just had a ton of people using our thing. And then at some point I was giving a talk somewhere in Dallas about this system and how we could digitize books etc. And the guy who was the CTO of the New York Times was in the talk and he said to me hey you know what we have this archive of 30 years of content from the New York Times that we have not been able to digitize particularly because computers cannot recognize the words. How about you digitize it for us?

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Guy Roz29:15

And just out of curiosity, eventually I'm assuming you thought this could make money.

L

Luis Von Ahn29:21

We thought we thought but we really didn't. We kind of thought we could make money, but we didn't know how. And what happened is this guy, he then sent me an email. He said, 'No, I was serious. Let's do it. How much would you charge me to do this?' Charge them to do what? To digitize their content in your old New York Times, the entirety of the New York Times archive. And so, you know, we kind of scrambled and we had no idea how much to charge them. And then we just thought to ourselves, okay, how much would this person have to pay people to digitize? Because the only other solution is people. Yeah. So, we came up with something and we said, okay, divide that by four. And that's what we'll charge you. And the number we came up with was for every year of content we will charge you $42,000. For every year of content in the Times. Yes. Over every if you take one year all editions of that year we will charge you $42,000 to digitize that whole thing. That's the number we came up with. And then they said yes. How many years is that? Like 120, 30 years? Yeah. So this is several million dollars of a contract there. But they said, 'Okay, we'll pay you per year. Let's do it one year, then another year, then let's see what happens.' And so they sent us the first year. We did it. And it turns out because Facebook was already using our captcha, we actually were digitizing relatively fast. Like how quickly would it take to digitize a year? A year was being done in about a week. What? A week of people typing in captchas could digitize a whole year of the New York Times. Yes. So that's what was going on. I'm just here's a question right which is say I was getting on Facebook in 200 this is like 2008 I think when the Times approaches you right? So I'm on Facebook in 2008 and I sign up for it and I got to write a captcha and the word that I've got to decipher is anxiety one of my favorite words and I type that in but how do you know how does captcha know that I did that accurately?

That's a very good question. What happens is for you, we actually give you two words. We give you one is the word anxiety. It's a new word that we just got out of whatever the New York Times. And then the other word is a word that we already have digitized. We already know what the answer is for the other word. And then we don't tell you which one's which. We just tell you, please type both. And if you type the correct word for the one for which we already know the answer, we assume you're a human. And then we also get some confidence that you typed the other word correctly. Got it? And if we give this new word to like 10 different people and they all type the same word, they all type anxiety, then we agree. Then we know.

G

Guy Roz31:48

So your accuracy was pretty high.

L

Luis Von Ahn31:51

Very high. Yeah.

G

Guy Roz31:52

Wow. So, within a week or so, you get this first year of the New York Times digitized and then presumably they're like, 'Okay, let's keep going.'

L

Luis Von Ahn32:00

That's right. And so what started happening is they started sending us checks for $42,000 coming in pretty quickly. And by the way, we had no company. We had nothing. And at some point, Carnegie Mellon got wind of this. And they're like, 'Wait a second. You're kind of running a company here, but not really because there's not even a company. You got to get out of here.' They had a standard deal that says, 'Okay, if you're going to start a company based on something that you came up in your research, we'll take 5% of this company.' And so that's what happened. So we just said, 'Okay, how about you keep 5%, we'll start a company.' And so we did. We started a company. I got a lawyer. We formed a company. And pretty soon we were making, you know, $42,000 every few days.

G

Guy Roz32:38

And did you call it Recaptcha?

L

Luis Von Ahn32:40

It was Recaptcha, Inc.

G

Guy Roz32:42

Did you leave Carnegie Mellon or did you stay on as a professor?

L

Luis Von Ahn32:45

No, I stayed as a professor. This was really a side hustle. Everybody I stayed as a professor. Ben, who was also working on it, stayed as an undergrad. He was like by then he was like a sophomore. He just stayed as an undergrad. I stayed as a professor. It was a side hustle. But it was making quite a bit of money for us not doing all that much in there.

G

Guy Roz33:00

It's incredible. I mean, you basically have a side hustle where all of the work is being done for you by people who aren't even know and wouldn't really care cuz it takes them 2 seconds and they're getting a free Facebook account. Meanwhile, they're digitizing the Times and you're getting $42,000 checks every couple of days from the Times. Yep. That was the what was going on. It's like one of the most genius businesses ever. Like I can we can you we talk after this interview is over to figure out a thing like this because this is amazing. You don't have any employees. This is incredible.

L

Luis Von Ahn33:37

Yeah, it was pretty good. But then that went on for some time and then actually Google in fact bought it for their own book digitization process.

G

Guy Roz33:46

Hold on. They approached you. They saw this and they saw that this was really and they said to you, 'Hey, we can use this for our books digitization.'

L

Luis Von Ahn33:55

Yes. And what they like threw a number on the table. Multiple numbers were thrown in and out and in the end we decided this was a good home for it. So we sold it to Google and this time I did go to Google for 2 years. So I took a leave off of being a professor.

G

Guy Roz34:14

Okay. So you were running this company, this small business. Google buys it from you which is just incredible. You're still at this point really young. This is really life-changing.

L

Luis Von Ahn34:26

Yeah. Especially since we didn't have investors or anything. It's all the money went to us. And your startup costs were relatively low. Yeah.

G

Guy Roz34:34

Wow. All right. So, you get acquired by Google. You are still a professor at Carnegie Mellon in Pittsburgh, but you went to California to Silicon Valley to go work at Google.

L

Luis Von Ahn34:45

Google happens to have an office here in Pittsburgh. And so I was spending about half time here in Pittsburgh and half time in California.

G

Guy Roz34:52

And what were you doing at Google? Are you still just basically running recaptcha?

L

Luis Von Ahn34:55

Well, the first order of business was to integrate recaptcha into the Google infrastructure. That took about a year, but I was still a professor and even though I was on leave, I still had PhD students. And towards the end of that first year, I started getting very very interested in the project which happened to turn into Duolingo.

G

Guy Roz35:14

And presumably, Luis, I mean, given that you'd already turned down Microsoft like four years earlier, you were not going to become a Googler. You really I mean this is part of the deal. You had to go work with Google make this happen. But it sounds to me like you're so restless. You were not going to just work in a big organization for the rest of your career.

L

Luis Von Ahn35:32

I wasn't going to do that. Yeah. I it's not my thing. I mean I kind of have to do my own thing.

G

Guy Roz35:38

What do you think the reason for that is?

L

Luis Von Ahn35:41

I don't know. I mean I probably because I'm an only child. I don't know.

G

Guy Roz35:45

Are you just restless?

L

Luis Von Ahn35:47

I'm restless and I'm also obsessive. I obsess on one thing and this is what happened with Google in the end. I mean I was starting to get obsessed on this new project Duolingo and I just had to leave and by the way leaving cost me quite a bit of money because some of the recaptcha payment required that I stay there for 3 years. Yeah. And I did not stay for 3 years.

G

Guy Roz36:06

So you had to give up some of the money but so in the meantime you're still at Carnegie Mellon teaching. And I guess you've got a graduate student there who would eventually become your co-founder at Duolingo and I think his name is Severin Hacker. Is that right?

L

Luis Von Ahn36:24

Severin Hacker. Last name is Hacker.

G

Guy Roz36:27

I mean, it's like a movie name.

L

Luis Von Ahn36:28

And by the way, the way I met him, I was literally sitting in my office one day minding my own business. And then this lanky guy shows up, super tall and super skinny. And he says, 'Hi, I'm Severin Hacker.' And I just said, 'What?' They didn't even parse it. And then he just did hand gestures. Severin he did a gesture that is like basically cutting his arm as if he was severing

It. And then hacker, he just did like as if he was like moving his fingers like typing with the computer. And then I'm like, 'Oh, sever hacker. Wow.' And he said, 'Yeah, I'm here and I would like to do research with you, kind of work with you.' And I said, 'Sure. Your name's so amazing. I'll do it.'

G

Guy Roz37:10

When we come back in just a moment, Luis and yes, Sever Hacker take the Recapture Business model and try to use it again to teach people foreign languages for free. And how they discover that particular model is just not going to work. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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Hey, welcome back to How I Built This. I'm Guy Roz. So, it's around 2012 and Luis has been working at Google for 2 years and he's got one more year to go to get fully paid out, but he's itching to get going on his next project. So, he walks away from Google early. Interestingly, what motivates me started changing quite a bit after the recapture acquisition because I really thought, okay, I'm in a really fortunate position in my life. I've now, you know, I don't particularly need to worry about money. Can I do something that helps people? And so, I really started thinking about education. And Sean, fortunately, was also very much into education. So, we started thinking, can we do something with education that gives it away for free? And the thinking really was there's all these people that I grew up with in Guatemala, very poor. And a lot of people talk about education as something that brings equality to different social classes, but I always saw it as the opposite, as something that brings inequality. Because what happened, at least, you know, in my case, those who have money can buy themselves the best education in the world, and those who don't barely learn how to read and write.

But you're thinking along the lines of like what is something that can be free, but that would kind of be self-generating. So for example, many business models offer a free service with advertising. That's Facebook's model. That's Google's model. They capture your data but you get this service in return. But you were thinking how can I create something that doesn't cost people anything but that can be sustainable.

L

Luis Von Ahn46:54

That's what I was thinking. I was thinking can we make it sustainable and can we make it free? And languages in particular changed. I mean Duolingo is a way to learn languages. We ended up going to languages particularly also because in both of our cases we're not native English speakers.

G

Guy Roz47:10

Sean was not either.

L

Luis Von Ahn47:11

No, he's from Switzerland. He's a Swiss German native speaker. And so in both of our cases, learning English completely changed our lives. And I just knew, you know, when I was growing up, everybody in Guatemala wants to learn English and nobody could afford it. And turns out that in most countries in the world, if you know English, you can double your income potential. So we thought, okay, can we figure out a way to teach people a language in particular, teach you English in a way that's free and but also self-sustaining? Like how can we make it so that it kind of pays for itself?

G

Guy Roz47:44

Okay. So you've got this language. You think language is where it's going to be at because that's how we can actually help people increase their income, for example, especially in other countries. And then the next question is okay what does that thing look like?

L

Luis Von Ahn48:00

Yep, that's what we were thinking. And then eventually we came up with this idea which is pretty similar to recapture. Turns out today Duolingo does not work this way. It is a good idea but it is a relatively impractical idea.

G

Guy Roz48:14

So what was it?

L

Luis Von Ahn48:14

So the idea was this. We're going to give the service entirely for free but instead of having people pay us, we're going to get them to help us translate stuff. So look, there are all these companies that want to translate stuff. For example, CNN would like to translate all their news that they publish from English to Spanish. They're currently paying people to do that translation. We thought, okay, what if we get these people who are learning English on our platform, what if as a part of their way to practice, after they learn some stuff, we tell them, hey, here's a CNN article. Can you translate it? It's in English. You're learning English. Can you translate it into Spanish? And then if we get multiple people to translate the same thing and they kind of collaborate with each other to make a translation, at the end we'll get a translation. And we thought okay we could sell that translation back to somebody like CNN and make money that way.

G

Guy Roz49:06

And you would use the same technique as used with recapture, like if 10 people got the same exact sentence you knew it was right.

L

Luis Von Ahn49:13

It had to be a little smarter than that. It turns out if you give a sentence to 10 people they'll all translate it differently. But yeah, generally yes. I mean we would use, you know, they had to be pretty close to each other. Then we also had another step where in the exercise the person wasn't 'translate this' but 'tell us whether the translation is right or wrong.' So some people would check the translations. But in the end we built the system actually that worked pretty well that basically you could give it a text in English. There were people who were learning English or who could be learning English and then they would help translate it and then the system would pop out a translation that was made by people and the translation was very good.

G

Guy Roz49:52

It's instead of CNN paying some translation service, they would just pay you and you would again, like the New York Times sending you $42,000, they would just have your students learning a language, but they would also be translating these articles into their native language.

L

Luis Von Ahn50:09

That's exactly what the idea was.

G

Guy Roz50:10

So, okay. So, you have this really great idea. By the way, I'm assuming you're funding the whole project, right?

L

Luis Von Ahn50:17

Yeah, it was a Carnegie Mellon project and it was being funded by a grant from the National Science Foundation and also from my MacArthur grant at Carnegie Mellon. And funding at the time what it meant is basically paying for Sever's salary.

G

Guy Roz50:30

Yeah. And so at what point did you say to Sever, all right, let's spin this out and start a business and figure out who...

L

Luis Von Ahn50:38

This was also an interesting thing. We thought, okay, we're let's do this. This is a good idea. We're convinced it's a good idea. Let's do this. But the first thing we need to do is hire more people because the two of us just can't do it. So we started hiring people but all inside Carnegie Mellon. We realized actually hiring people was pretty expensive inside a university. And then we thought, okay, well what I need to do is apply for a bigger grant from the National Science Foundation. And I started working on that. And these grant applications are like 30 pages long and you have to wait like a year to hear whether you get it or not. And it's like a couple million dollars maybe. So I was working on that and then suddenly I got connected to a venture capital firm, Union Square Ventures. And you know, I talked to them about this and very quickly they got back to me and they're like, hey, we could fund this. I didn't have to write 30 pages. It was much easier to get that money. So we thought, okay.

G

Guy Roz51:37

They wanted to just, they wanted in on this because, well, first of all, you had a track record.

L

Luis Von Ahn51:40

It was mainly a track record in retrospect. And you know, I have a relatively good relationship, close relationship with the Union Square folks. I mean they've now told me, look, we never thought this would work but you had a really good track record so why not.

G

Guy Roz51:53

They want to invest in you. So when they approached you, they said we want to fund this, we want to invest in this. And at this point you had not dealt with outside investors.

L

Luis Von Ahn52:01

We had not. And also this was still not a company. So at that time we just thought, okay, well let's make it a company and let's take some funding. Yeah.

G

Guy Roz52:10

And how did you do that? I mean, Sean was your student, so was there an uncomfortable conversation or was it pretty clear you're like, listen, it was my idea, I'm the boss, so I'm going to have x percentage.

L

Luis Von Ahn52:20

You know, Sever is just, I think it's partly because he's Swiss or because he's like a computer, he's like Mr. Spock. He had that conversation with me. I didn't have it. He sat down and he said, 'I want us to write a contract, but it's not a lawyer contract. I just want to write basically a word document that we write a few lines long that just basically says what our understanding is and we're both going to sign it.' And we wrote down a contract that was just really simple. It's like we'll go in it half and half. And all decisions related to hiring we're going to do together. All decisions related to, I don't even remember what else, but there's like three or four bullet points. And then it just said his name and my name and we signed it and that was it.

G

Guy Roz53:05

So, all right. So, you create a company and you've got some interested investors. And I think you raised like three plus million dollars from a bunch of different investors, right?

L

Luis Von Ahn53:16

Yes. 3.3 million, which at the time this was a normal Series A. So, it's $3 million from Union Square Ventures and $300,000 from a combination of Tim Ferriss and Ashton Kutcher.

G

Guy Roz53:28

Ashton Kutcher. He was like way ahead of the rest of Hollywood. Now, everybody wants to be Ashton. Kutcher was a very smart guy in that respect.

L

Luis Von Ahn53:34

Smart guy. He's way ahead. He was way ahead of the game. I mean, everybody now wants to be an Ashton Kutcher. They're like, right. It's like there's LeBron James and there's Serena Williams and there's... Anyway. All right. So, Ashton Kutcher with that money. Did you get an office? Did you get a staff? How many were you able to hire a bunch of people?

Yeah, we hired a few people. We did get an office very close to the Carnegie Mellon campus and we started working on it. And at the time pretty much everybody told us, you're not going to be able to beat Rosetta Stone. Like, why would anybody use this? You know, we just kept on saying, well, because it's free. This is going to be free. And that was our main selling point. We didn't know if it was going to work, but we worked on it and we launched Duolingo.com in 2012. And it was very fortunate that I had given a TED talk about this. As soon as that went online, we got a ton of people come to Duolingo.com to try it out. And it started growing pretty fast because it was a free way to learn a language. And at the end of your lessons we would say, hey, here's this article, you want to help us translate? And we landed a contract with CNN and a contract with BuzzFeed that we were going to translate all their news from English to Spanish.

G

Guy Roz54:51

How, by the way, how did you convince... I mean, was it relative?

L

Luis Von Ahn54:57

It didn't cost us any money to get the translations. Our users were doing it. We just said, 'Oh, how much do you pay for...' At the time it was like they paid like 10 cents a word. We said, 'We'll do it for five cents a word.' And it worked. The translations worked and everything. There was one problem. The amount of money that we were going to make was actually relatively small. And it's because translations are a pretty shitty business. It's 5 cents a word, but then pretty soon, suddenly, the people from BuzzFeed found somebody else that would do it for 4 cents a word. And then we're like, fine, we'll do it for three.

G

Guy Roz55:32

It's a race to the bottom.

L

Luis Von Ahn55:33

It's a race to the bottom. And then computers are getting better at it. And by the way, you're assuming you didn't want to found a translation service. You were founding an education company.

G

Guy Roz55:42

That's right. And when one thing we realized is as we were executing on these contracts, we realized that's where the money's coming from. So we're spending more and more of our effort making sure the translations are accurate as opposed to teaching well. And there was no ads. It was just a website initially.

L

Luis Von Ahn55:59

Yeah, exactly. We were growing. It was good. But then a couple of things happened. The first thing that happened is we realized this was not going to be a great business. The other thing that happened is we hired a well, one engineer and a summer intern. They started on the same day on a summer and we told them, 'Hey, the two of you, you don't know each other. We've heard these apps are the thing now instead of websites or they're starting to become the thing. Can you two make a companion app to Duolingo.com?' Let's try that. That's going to be your summer project. Let's make a companion app to Duolingo.com. They came back at some point, they said, you know what, it doesn't have to be a companion app. We can actually do all the functionality of Duolingo. We can fully learn a lot of aspects of the language from this app. So we developed it, we launched it, and we were at exactly the right time because there were other apps to learn a language in the app store, but they were pretty crappy and also cost money. And so very quickly this became the most downloaded education app of all apps.

G

Guy Roz57:07

Wow. And you guys were there right as apps were totally starting to explode.

L

Luis Von Ahn57:13

Yeah, that's right.

G

Guy Roz57:15

And how were you... I'm just curious. How were, I mean you did not have an, I mean you're an educator, you're a professor, but how were you building a curriculum in different languages?

L

Luis Von Ahn57:24

This is great. I mean yeah we didn't, we had no idea. I mean, we went and read some books about how to teach languages. And first of all, most everybody does not agree on what the best way is to teach a language. And then so we thought, okay, this is pretty hard. Let's just take what we can from the books and put it out there. So I made the first Spanish course myself because I'm a native Spanish speaker. Sever made the first German course himself. And this was going to be just like kind of the gamification model where it was just level up, level up, level up. That's the other thing that we realized in the process when we started making the first versions of the courses. We had people try it out and people would say, 'Oh my god, this is really boring.' The hardest thing about learning something by yourself is staying motivated. So let's make it fun. So fortunately, early on, we made something that was both fun and also taught you a language.

G

Guy Roz58:18

Got it. All right. So, you launched this thing. Is it pretty clear to you, by the end of that year, by 2013, I mean, I think you got 15 million users by the end of that year.

L

Luis Von Ahn58:30

Yep.

G

Guy Roz58:31

Was it pretty clear to you that it was not going to make money? It was not going to be sustainable just by doing contracts with news organizations.

L

Luis Von Ahn58:37

It was. It was. And particularly because we couldn't figure out how to make the translation stuff work on our app. Just people couldn't type that much in the app, etc. So we just could not figure that out. And the majority of our users were in the app. So I made the difficult decision to cancel those contracts and forget about trying to make money and just raise more venture capital. And sure enough, we had some very good investors who decided to invest and that's how we were sustaining ourselves.

G

Guy Roz59:05

So you're basically sustaining yourself off investment cash, but did you feel like you had to change your business model?

L

Luis Von Ahn59:13

I mean that, you know, this by the way has been one of the biggest struggles with Duolingo. Our mission from the beginning has been to give free language education. This is why we started the company. That is the thing. There's an easy way to make money here, which is just charge for it. And so when we talk to investors, the first thing I would tell them is look, the one thing that will not change is I'm not going to charge for people to learn a language here. And so, you know, people would invest and I think a lot of times they would invest and they would think, okay, eventually they're going to charge. But I told them, you know, I'm not going to charge. And so we raised funding. I mean, we raised I don't know, at some point we had raised close to about $100 million and...

G

Guy Roz59:57

Wow. Wait, hold on. Stop. Pause. I mean, you're not manufacturing a product in a factory. Why? I'm just thinking it's ones and zeros in a computer. Tell me why it's so expensive.

L

Luis Von Ahn1:00:06

Here's the thing. You want to hire really good engineers and really good designers and really good product managers. They are not cheap. You got to pay them. And that's the expense, right? These are the most expensive. Software engineers are not the most expensive part of it, but you're based in Pittsburgh. You're not based in California.

G

Guy Roz1:00:25

Correct. And you would think that because we're based in Pittsburgh it's cheaper.

L

Luis Von Ahn1:00:29

Yeah. It's not true. There's a reason. From the beginning, we decided we're going to hire only the very best people. And the very best people have offers from companies in California and they say, 'I have this offer that is for, you know, I'm just graduating from college. I have this offer that is for $130,000. Are you going to match it or not?' And so what do you do? But we had no idea how we were going to make money. I mean the first way we tried which was these translations we had given up on. And at some point we raised money from Google. Capital G is one of their investment arms. We raised money from them. It was, I believe it was $45 million that we raised from them.

G

Guy Roz1:01:08

Wow.

L

Luis Von Ahn1:01:08

You know, I was feeling good. I thought, okay, well we can continue raising money for a while. Like whatever. I don't need to figure out how to make money. We can just continue raising money for a while. And the partner from that firm sat me down and she said, 'You know, you're not going to find a bigger fool. We're the biggest fool. And nobody else will invest in this company if you don't figure out how to make money. If you have zero plans to make money, nobody else is going to invest in this company.' And that's when we started kind of freaking out and trying to figure out how we're going to make money.

G

Guy Roz1:01:37

When we come back in just a moment. Why Luis says no to one of the most obvious ways to make money and why he ultimately decides to say yes. Stay with us. I'm Guy Roz and you're listening to How I Built This.

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Hey, welcome back to How I Built This. I'm Guy Roz. So, it's 2015 and Google has just invested $45 million in Duolingo, which is great, but Luis still doesn't know how it's going to make money. And one thing he doesn't want to do is sell ads.

L

Luis Von Ahn1:04:01

We were very precious about this. We cared a lot about the user experience in Duolingo. And we thought, first of all, we're never going to put ads in here. Secondly, we're never going to charge people. And basically Laila from Google was like, 'Well, I don't know how you're going to make money because these are the standard ways of making money, but you got to figure it out.'

G

Guy Roz1:04:20

This is an important point because I think a lot of businesses start out this way with really strong principles that seem right, but when you say that, you actually kind of put yourself in a box because sometimes there are reasons to do some of those things in order to accomplish the bigger goal. For example, of delivering a free product. You are completely right. So, you had to basically do a 180. You had to have hard conversations with people and say, 'Hey, we got to start thinking about maybe advertising on our site.'

L

Luis Von Ahn1:04:52

We did. At the time we had, I don't know, 60 employees. But it's funny because the people we had hired early on, they had offers from companies that had much bigger names than us, Facebook, etc. And the reason they had come work for us is because they really believed in our mission of giving free language education. So we had ended up with basically 60 to 70 zealots who all just wanted to give free education. The mission, like we're here for the mission. To this day it is still like that. Which is great but we had a year of turmoil where basically we're like, okay, we need to figure out how we're going to make this sustainable because we're not going to be able to raise much more funding if we never make money. And so, sorry, but there's got to be a way to make money. And if you don't have money, you don't have a business. We don't have a business and we're not going to be able to reach the number of people we want to reach. At some point enough people got convinced that okay, we'll put an ad at the end of every lesson. I remember we showed it to our head designer who almost vomited.

G

Guy Roz1:05:56

I get it. I mean, did people say to you or did you get the feeling that like, I don't know, people thought that you were selling out?

L

Luis Von Ahn1:06:03

Yeah, I think so. And now, you know, I don't think it's too many people because I myself went through a transformation that took me several months to go through. So I, and you know we put the ad at the end of every lesson and fortunately that actually gave us quite a bit of money. I mean as soon as we put that ad our run rate went from zero to like $10 million a year. One tiny ad. It didn't even cover the whole screen.

G

Guy Roz1:06:27

What was the company?

L

Luis Von Ahn1:06:27

Oh, we used Google ads. So they came from everywhere. Random places.

G

Guy Roz1:06:34

Not late night booty call.com though, I hope.

L

Luis Von Ahn1:06:37

No. And soon after that we got a bunch of people who would tell us, 'Hey, I don't like ads, can I pay you to turn off the ads?' And we thought, okay, how about we launch this subscription service where the main thing is you can pay us to turn off the ads. It turned out, and this is just we really just didn't realize this, subscriptions made us a ton more money than the ads.

G

Guy Roz1:07:01

And what would it cost to subscribe?

L

Luis Von Ahn1:07:04

$9.99 per month.

G

Guy Roz1:07:06

Okay. So, a little bit more than Spotify, but through that you could do any language you wanted, any course with no ads, right? And if you didn't want to pay, you just had to watch the ads at the end of a lesson. So all of a sudden you had people who were willing to pay some money. But still, I mean we know the advertising model and podcasting, it's still a small percentage of people when you got a premium version, right? Even Spotify, most people are still getting it for free and dealing with the ads.

L

Luis Von Ahn1:07:38

Yes, so well at first it was very few. By now, I mean it's been a couple of years since we added our subscription. Right now 3% of our users pay for the subscription.

G

Guy Roz1:07:48

Which is a lot. How many total users do you have?

L

Luis Von Ahn1:07:51

A lot. I mean, this is about tens of millions. Active users right now we have about 40 million monthly active users and about 3% of them are paying subscribers.

G

Guy Roz1:08:02

All right. Now here comes the tough part. Duolingo of course is free. So it's a free offering, but even with free offerings, there's going to be criticism. And there have been professors who specialize in this who have said you can't really get that proficient with Duolingo. You know, maybe I can learn some words or phrases, but it doesn't really teach me a language. And before we dive deep into this, just in general, when you hear this criticism, does it make you defensive or does it make you think like, maybe we got to make this a little better?

L

Luis Von Ahn1:08:39

The truth is there's a lot of marketing out there that tells you that you can learn a language in 9 days. This is not true. Actually, learning a language takes years. This is the first thing to understand. Secondly, there's various levels of course. Duolingo teaches you pretty well from zero. So starting from the beginning to about intermediate depending on the language that you're learning. If you want to use Duolingo and start from zero and get to the point where you're the poet laureate of that country, that is unlikely to happen with Duolingo by itself. That's just not going to happen. But the way we see it is, a, we keep getting better and better. B, if you look at any single method, take for example the single method of US high school education. It kind of doesn't work very well. How proficient are people who take Spanish throughout high school at the end of high school? On average, not that proficient, right? And our goal with Duolingo, we're not there yet, but our goal is to get people from zero to a level of the language called B2, which is where you can get a knowledge job in that language. You know, Google, for example, employs software engineers here in the United States whose English level is B2. That is our goal. We're not there yet.

G

Guy Roz1:09:58

So, we interviewed James Park who created Fitbit. And the genius of Fitbit was it was like a gamified exercise, right? Like people are like, 'Ah, I did 10,000 steps today.' It's hard to get humans to change habits. So how do you get a significant percentage of people to finish a language program?

L

Luis Von Ahn1:10:16

Yeah, this is what we spend a lot of our time on. And this is one of the things that when we get criticisms, one of the things that they don't take into account is a lot of the research about how to teach a language is done with people who are in some sense held hostage in the classroom. The hardest thing about learning a language is staying motivated. So we spend a lot of effort trying to make Duolingo more motivating and more fun. And the way we do that is just by adding game elements. I mean, using Duolingo, a lot of people refer to it as playing Duolingo. It feels a lot like playing a game. You get rewards, you level up. And other things we do, for example, this is another interesting thing we do. We want you to use Duolingo every day. If you actually want to learn a language, you got to turn it into a habit. One thing that is really powerful for us is we send you notifications. So we have a pretty sophisticated artificial intelligence system that figures out when to send you a notification and what to say. And for example, one of the most powerful things we've done is after about 5 days, if you haven't come back, we send you a notification that says, 'These notifications don't seem to be working. We're going to stop sending them for now.' That turns out to be an extremely powerful way to get people to come back. Because they feel guilty that we're stopping the notifications. So that gets them to come back.

G

Guy Roz1:11:38

It's like you got to hold people accountable, which is very hard. This is why people have personal trainers because otherwise they won't go to the gym. But why would somebody pick Duolingo over any other language app? You mentioned Rosetta Stone, right? I'm sure you've looked at it. I mean, obviously you're a competitor, but they probably do a decent job teaching languages. So why wouldn't you just do that?

L

Luis Von Ahn1:12:03

I mean, before we launched, Rosetta Stone was the biggest thing in the world, and everybody told us, 'You're not going to be able to beat them.' By now, I would say we probably have 50 times more users than they do. Our revenue is probably 5x their revenue. Something to that effect. There's a big reason. It's the fact that we're free. And this is one of the things that our mission, which is really giving free language education, I think it's actually good for business. We don't spend very much on marketing. We have all these people, 97% of our users don't pay us. So it's just, I think we have this huge user base of people who are basically our marketing engine. But a lot of companies in education eventually turn into marketing companies. For the following reason. You realize, man, making improvements in how well you teach is hard. It takes years. So for every dollar you have, you quickly realize it's actually better to spend your dollar marketing your product rather than making your product better. I've been a hardliner on this. We spend all our effort just making the product better. And the main reason is I think we're really in it for the long term and I think in the long term the better product will win. And this is why we don't spend so much money on marketing.

G

Guy Roz1:13:18

Luis, in December of 2019, your company was valued at $1.5 billion. So what's the exit? I mean, you got investors, you were convinced you had to keep it sustainable and grow it, and you're now valued at $1.5 billion. Sounds like you're keeping the lights on pretty well. What's the endgame? At some point, it's sell or go public.

L

Luis Von Ahn1:13:46

The endgame here is to go public. That's what we've been working towards. We have the revenue now to be able to go public. We are cash flow positive. And one of the things that I think is really important is the way I see it, we have so much more still to go in terms of how much better we can teach and also teaching other stuff. We recently released an app to teach reading to young kids. It's called Duolingo ABC. I think there's a huge amount of impact that we can do with that. So to me it's just keep going with this. That's the goal.

G

Guy Roz1:14:22

Luis, given all of the things that have happened to you, I mean your incredible success. How much of that do you attribute to your intelligence and how hard you worked and how much do you think it's because you were lucky?

L

Luis Von Ahn1:14:34

I was definitely lucky. I mean, launching an app at the time we launched was exactly the right time. Launching an app in late 2012 was a really good time to launch an app. So I've been incredibly lucky. And I think just hard work on the same thing. I get obsessed with the same thing. I've been working on Duolingo for now 8 years and I'm pretty obsessive about it. So I think it's both.

N

Narrator1:15:04

That's Luis Von Ahn, co-founder of Duolingo. We first ran this interview back in May of 2020, and a little over a year later, the company did in fact go public at a valuation of nearly $5 billion. And today, it's valued at nearly $9 billion.

G

Guy Roz1:15:23

Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's totally free. This episode was produced by Casey Herman with music composed by Ramin Arablouie. It was edited by Neva Grant. Our production staff also includes JC Howard, Sam Pollson, Alex Chung, Malia Agadello, John Isabella, Chris Msini, Carrie Thompson, Carla Estz, and Katherine Cipher. I'm Guy Roz and you've been listening to How I Built This.

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