Don Katz: It was this working backwards from a well-articulated vision I would find, I pointed out them, Cezanne. That's the way he painted. It wasn't just me or later Jeff Bezos working backwards from this big kind of hairy gull. Jimmy Allen: So, what if your crazy vision worked? I mean, really worked? Imagine you built a product that now sits in the Smithsonian, created a whole new category, disrupted an industry, expanded exponentially with user growth of almost 800% in the last decade. Now, that's growth. But that growth creates complexity, the breeding ground for the dreaded energy vampire, and when that happens the founder vision becomes a distant memory. So, how do you avoid the complexity trap? How do you manage the managers and reconnect with your mission? Well, perhaps the answers could lie in Rolling Stone Magazine, dreaming in color, and a concept first introduced by Aristotle, procity. I'm Jimmy Allen, and this is Founder's Mentality: The CEO Sessions. And today we're joined by Don Katz, founder of Audible. He served as CEO from the company's founding in 1995 until 2020 when he moved into an executive chairman and then an advisory role. In 2008 Audible was bought by Amazon, under which it operates as an independent subsidiary with access to a huge client base. And today Audible is everywhere, with more than a million titles in the catalog, reaching millions of listeners each day in over 180 countries and 50 languages. Before Don founded Audible, he was an award-winning journalist and an author for 20 years. As a magazine collector I have two vintage editions of Rolling Stone where his stories paint the cover, but let's let him tell that story. Don Katz: I actually tend to think of all of the things I brought into the formation of Audible in terms of varieties of lessons either read or experienced, and there were many. Probably the most profound experience for me was personally being able to learn from W. Edwards Deming, known as one of the greatest American statisticians, father of the quality improvement paradigm that made the Japanese Revolution. But he was the one who said to me often that nobody asks for true invention. That true invention comes from the stars basically, and some crazy founder connects dots in a particular way and he basically would list things, the pneumatic tire, the air conditioner. They weren't improvements, or as you learn in business school, sort of process improvements on a given concept, they actually kind of came for the blue. I would say also that I had an earlier teacher who in many ways is kind of the co-founder of Audible, Ralph Ellison, the great novelist. The whole idea that the spoken word was the beginnings of what was truly American literature. Stephen Crane, Mark Twain wrote like Americans, because of the way they listened, and it informed American literature. So, I was professional writer and made a decent living as a writer, shocked people around me when I left this to become a capitalist, but I knew so much about what I wanted to do because of Ralph. So, I went into all of this with a pretty specific plan. I would also say that I had experiences that completely formed how I wanted this corporation to be. One of them was, as in my early days a writer for Rolling Stone I was pretty much their war and revolution correspondent in the '70s, and Rolling Stone itself was an institution that was imprinting the culture with something new. It was iconoclastic and the feeling that you got when you were part of a movement, there's nothing more joyous than being part of an organization that's truly creating change. Jimmy Allen: I do think it's really important to understand that foundation, which is, you were a student of causes and passions and what that could do to humans. You were a student of innovation who also happened to get lucky with a guy that could then teach you the role of technology in innovation. And then you had this actual passion for inventiveness, which is doing something revolutionary with the spoken word. Can you just tell a little bit more about how you use the phrase spoken word, what it means to you? Because I think you can't understand Audible unless you understand that. Don Katz: Yeah, it actually is problematic in that I tend to talk about the music in language, the power in language, the emotional content of language theater, for instance, is never spoken about in terms of just the words written. It's refracted through this performance, this nuanced sensibility. The whole idea of Audible was to bring an artistic and powerful emotional experience into the ears of millions and millions of people and to not have this concept of well-composed words just simply read to you, sit there alone, which created a very small business. It was just in a tiny little business, and I thought it was something that with the advent of technology and this idea that you could reposition the concept of listening as having massive intellectual integrity, learning integrity, and it also ... And huge literary capacities to have a refracted interesting performance, even to the most literary people, all of that went against the status quo at the time. Jimmy Allen: People have to understand this about founders, the difference in what you're saying. My father had terrible rheumatoid arthritis, and for a period of time his corneas got so cracked from it in the early days of the drugs that he needed to be in a closed room and we would bring him books on tape. And just to reinforce what you say, books on tape were a disgruntled not very happy person, probably paid a very low wage, literally reading into a cassette player as fast as possible the text. There was no experience, there was no joy, there was no performance. It was literally just the most crude way of getting words into an audio experience. That is radically different than what you felt you need to do with spoken word. The language you use is, let's start with theater and the way that the actors go. Let's go to Ralph Edison and Ellison and the beginning of American literature. And I remember the first time you and I met we had this discussion about the battle of ears versus battle of eyes that you were doing something, you were pre-podcast and we were basically saying that what Audible was doing was suddenly legitimizing the spoken word in a way that books would be a very small foundation of what would end up happening once the true battle of ears was understood. Don Katz: There was a massive utility to, I mean, you don't raise as much money as I raised to create the foundational technology, the whole infrastructure of a download system, the first intellectual property protection. You don't do that unless you can talk the talk about why millions of people would be using this. And that was simply, I would look at the triage of time and just point out to venture capitalists that there were unbelievable millions of hours that people were sitting in traffic with actually no high-quality experience in their lives that got them to work smarter than the guy in the next cube. Nothing that inspired them, moved them, and that we would fill that time with value. I knew that I would measure our success based on the habituation and consistency and loyalty, not just brand loyalty. This was people I could see using this service day in and day out. And it began to grow even in the early adopter space to levels that were proving the point every single day. Jimmy Allen: As you think about your time as CEO, what are the positive lessons you're learned? What did you get profoundly right do you think? Don Katz: Yeah, I think focusing on the character of a cultural mission that worked backwards from a deeply, deeply aggressive vision of the possible and never stopping that. I used basically Wernher von Braun's very to some extent not that intriguing management by objective sensibility in the early crew, but I did it with the eyes on some very, very large prize, which was always a household brand, because everybody would eventually understand this once they trusted the internet with their credit cards. Because that's how early I was. I mean, I'm talking this today is the day we're recording on. We went public in 1999. I started this company come November 30 years ago. And to think about, the internet was the phone lines. I mean we're talking about, we had to develop resume features and technical sensibilities about the fact that there was no broadband. So, it was very early, but I did things early- Jimmy Allen: You had to invent devices before anybody talked about devices, everything- Don Katz: Commercialized the first digital audio player now in the Smithsonian. We had to basically create file structures that called "maintain state," that no digital file did anything, including the years of MP3 later. So, I think I set out with a lot of different teaching elements. One of them was that the inputs and the outputs would never be financial at the beginning. And that basically it had to be disruptive inputs that you measured your success on that eventually became dollars. This was not only, as I tell founders all the time, a way to manage the managers who you hired to be always disrupting their own thinking, but it was also a pretty important way to keep the money guys at bay until it was time to show them, as I did, one of the most profitable high growth, in fact, potentially the most profitable and high-growth media-oriented model ever. I also knew I wanted to re-intermediate the standing value chain. And this was quite disruptive, because in the middle were some of the most aristocratic in the world of book publishing and basically very pleased including agents and everybody else in on the intermediation, so that was one thing. I also early on said, "We are never going to get caught from behind. We're not going to be that pioneers with the old adage about the arrows in your back, and we would literally do anything to win." And as we started to get very, very successful, and which was pretty early, and having market share that others thought was in some way negative, I use the word distinctive to basically be a way to say, "We are going to have everyone in the world listening, and that's going to be a positive." Another thing I did was, I said, you have to humanize the actual experience of the technology, meaning that the customer experience had to look through the customer's eyes at every node. It couldn't make sense to technical people, unless it made sense to non-technical people. And so, it was this working backwards from a well-articulated vision I would find, like I pointed out them to the ... Cezanne, that's the way he painted. It wasn't just me or later Jeff Bezos working backwards from this big kind of hairy gull. So, I believed all this stuff and maybe the fact that I was there with this full emotionally invested way of believing it did positively impact particularly the first generation for seven or eight years of near-death experiences. Jimmy Allen: What's fascinating about this story is, on one hand you can wax poetic, you can quote American literature, you can go into scientists and thinkers, you can quote days in Rolling Stone and some of the front page articles you have. There is also a business ruthlessness to you that I want to just highlight, because it's both sides. You use, I'm just quoting back to you, "We will also do anything to win. We will disrupt the intermediaries who have no consumer interests. They have their own. We will do what it takes to create the consumer experience that's actually going to work. We will shape the way our people work to the point that we're going to actually care that they give thought and attention to what we're talking about through written word, not through PowerPoint. Don Katz: But Jimmy, I do want to say, it was always through an ethical lens on everything. And the belief was though that this product was good for people, it would be good for the way people learned, the way people were no longer lonely in their lives. And I think, I look often, thank God I didn't start a social media company, given the complexity of what has been commandeered from that environment. So, I think yes, relentlessness is probably more attractive than ruthlessness. Jimmy Allen: I think the thing that went right for Audible is this extraordinary growth trajectory, this ability to be the first mover in lots of things, but growth creates complexity. And you use the phrase, "I also had to manage the managers." And I'm just curious with your own experience, you became so successful that you were big and large, and I imagine you couldn't always influence every single people, people who entered the company. So, just describe what complexity felt like as a visionary founder over time? Don Katz: Yeah, so clearly your concept of simplicity versus complexity was something that I probably articulated somewhat differently. But basically, I had one tenet and principle, and that was literally, "No arseholes were allowed." And so, I could speak at length about what an arsehole was. I could literally give disquisitions on arseholic behavior. And it was a way of basically saying that the political gamesmanship of managerial Realities was not appropriate to the collegial behavior, the camaraderie of trust that truly visionary companies would lead. And I tried my best to do that. I probably failed to some extent by trusting that my ability to show different mirrors and lenses to people who were kind of about themselves and probably what you would call energy vampires, I thought I could turn them. I wasn't as good at realizing some people just can't change. I don't know, I tried to keep the politics to a minimum, but if I couldn't, and then of course, you're managing also a board, you're managing the street, you're managing all sorts of constituencies. So, you're right, complexity made it harder and harder. Jimmy Allen: Don encouraged his managers to disrupt their thinking. No political gamesmanship, no arseholic behavior. By the way, I love that phrase. And another leader who totally gets this as Galip Yorgancioglu, former CEO of Turkish spirits companies Mey. When the company was privatized he needed to build a lot of his functions from scratch, and Galip then took a novel approach. Of course, he needed to recruit from the big consumer products companies, but he needed people who acted like owners. As one of his top executives remarked, "We were the black sheep from the blue chips, too impatient and rebellious to work with big company routines." And one of his major moves was this idea of a weekly Monday meeting. His leaders were expected to raise major issues, debate opposing opinions, argue, and then make decisions. Put simply, the culture demanded conflict, but then conflict resolution and commitment. I happen to know an expert in managing complexity, conflict and chaos from inside a recording studio. Elliot Wenman is the managing director and head of songs and studio at Abubilla Music. And look, recording a song sounds deceptively simple. Take a songwriter and a bunch of talented studio musicians with amazing ideas who want a great outcome and you bring them together in a room. But of course, alongside their instruments they bring their unique experiences, visions, tastes, opinion, ways of working, and man, that room gets chaotic fast. So, you've been at this business a long time. How do you manage that inherent chaos? Elliot Wenman: The first way is quite simple, and it's a technique we borrowed from Rick Rubin, legendary music producer. And it's essentially a focus ritual to get everyone aligned at the start of the session. And what we do is we light a candle, we ask everyone to put their phones away, and we say that for the next few hours we are committed to serving only this thing, and this thing is getting the best song that we can. Jimmy Allen: And is that enough? Because again, if I was a challenger, a lot of business leaders would say, "We all come in with the right will and spirit, so assume the candle's lit, and then we have chaos." Elliot Wenman: No, it's not enough. It's not enough. You need to be bringing people back as the session goes on to your true north. And for us what that is, we use a concept called prosody, which I developed with the artist before the session what the essence of the song is, what the prosody of the song is. And it can take a long time and the artist can get very frustrated. Because they just want to get in and record, record this song that we've written. But sometimes you have to go slow to go fast. And so, we spend a long time discussing what this essence is, figuring out and writing it out, distilling it to us just a couple of lines. That means when we're in the session and stuff starts to go off track and people are bringing all these different ideas, I can say, "Guys, stop. This is what we're trying to do. And we've gone in a completely different direction, let's get back to where we're trying to get to." Jimmy Allen: And do you have an example of prosody in action? Elliot Wenman: Yes, I do. There was a session we were doing a while ago where there's this beautiful song written by a singer-songwriter, just her and a guitar. And we were trying to explore different directions this song could go kind of arrangement-wise. So, it had a lot of different sax musicians in the studio trying out all these different things and musically really cool ideas, but none of it was really feeling right for the song. And actually, the bassist put her hand up and said, "Guys, I think that we've gone off track from where we agreed this song should be, the prosody. And I think that actually I shouldn't be playing anything. I think I'm being too busy and I should just sit out." Which is an amazing example of someone else taking the principle and putting it into action. So, part of it is just picking the right people. But the other part is a technique we borrowed from the Nashville co-writing community where they have a great phrase that's something like, "If you're there, equal share." Which basically says, "If you're in the room when you're writing, no matter what you contribute, you get an equal share to the song. In recognition that sometimes the best contribution is to not do anything." Jimmy Allen: Man, I love how Elliott works. Even creative processes can benefit from structure, but it's not about rules, it's about intention. The idea of prosody dates back to Aristotle, but it was best interpreted by Pat Pattison, the legendary professor from the Berklee School of Music. He said that there's only one rule of songwriting. "Understand the essence of what the song is about and do all you can to serve that purpose." And this concept applies to companies too, because it's a fact. Companies grow, they become more complex and they can lose sight of their purpose. You might recall in episode two, Christina Zhu described how she used rituals and shared experiences to constantly return her people to Walmart's why. And Don approached this challenge in an incredibly unique way. He created Audible's now famous people principles, a process that launched 1,000 conversations to discover the very heart of the company, its reason for being, but just don't call them prem values. Don Katz: For years I knew that these slogan-like aphoristic-like brand-oriented value statements were relatively disingenuous, often copied from other companies. Unfortunately, I was old enough to have been a journalist at the time of Enron and WorldCom to profoundly outlaw companies that ended up having papered over their realities with these same aphoristic statements that many of the early social media companies had adopted. I knew very well of some of our partner companies who got in trouble, who then proceeded to add, "Do the right thing." How many times do we see that? I just said that the fine print of these realities in a company that's supposed to be literary about words and their power, that if I did this, it was not going to be some simple statements, and it was going to be something that you had to read, you could consider, you could philosophize, you could lay against different examples. And I finally just set out and kind of did it. I was thinking, if it works for you, I might read the preface to the people principles, because it kind of sets out one of the purposes of these really significant numbers of words. So, this was in 2017, it says, "Audible's people principles celebrate who we are and where we've been and guide the way we work shoulder to shoulder to enhance the lives of our millions of customers. They reflect and apply to everyone who works at Audible, the entrepreneurs and operators, the dreamers and the doers, those who have worked here for 20 years, and those who have arrived in the past weeks and months. We hope they capture a sense of the place you would want to spend your days too." And I often would literally, I would give all hands and basically say, "Life is too short to simply endure a day at work." I said, "This company is kind of driving to something special and we're about to move this by country, by country into the ears of huge numbers of the population. And to say nothing of disrupting how people learn and remember and feel about themselves and succeed." And I'd say, "I just think our mission's worthy of something more than most businesses are just literally process improvements on a given theme. And this wasn't." I think that was where I went with it. When I did write them out it was a pretty elaborate process of inculcating the ideas country by country, office by office. And it came out a year we were hiring 300 people. We probably had 85 open recs when we were doing so. It was a way to talk about this is the kind of thing that you need to know if you're going to be a successful leader here. Jimmy Allen: I know you're talking about the fine print, but the fine print was then an invitation for a million conversations about where we want to go and what we want to do. And you went around the world, right? I mean, you talked to, have you ever added up how many hours you spent? Don Katz: I should probably do it, but it was what I did largely in 2017 from the spring forward to the rollout. And there would be films of Audible pioneers talking about what it was like to be part of these early foundational days right out of your playbook of Phil Knight's or others. Just tell these foundational stories. Then I would actually show the movie of an event you are at of me rolling out and giving the speech of why these things exist. Then it would go into interactive kinds of discussions in breakout groups, and it was a really kind of revolutionary teaching experience. And then basically we started giving awards for different of ones of the tenants. I really did enfranchise others in the ideation around the actual writing. One of the examples I often tell is that there was, "Articulate the possible and move fast to make it real." And so, there's a segment in there that does read, and I'll read this. "Audible exists to unleash the spoken words that inspire, offer insight, teach and persuade. The best visions of the possible are intellectual hypotheses made even better when data and research inform them. And the best action plans deploy an economy and clarity of expression that enables others to dream in color." Now, I didn't ever think of the concept of dreaming in color, and somewhat ironically at the advanced tech leader at the time who was this genius guy who grew up in a village in India that to this day doesn't have electricity, and very much English is second language. But he wrote this to me one day and I just picked it off and integrated it, and it really actually allowed Audible leaders possessed with enough self-knowledge that they were operators who needed to feel good about themselves as deeply operational parts of this idea-driven and operationalizing vision kind of diadem. I'm just going to say this, at this point in my career, Jimmy, I've realized is that if someone really is good at operationalizing, the last thing they want to be told is that they're not primarily creative. You have to have to be able to make those people feel they're part of something that is idea worthy, and is ethical and is powerful, and is meaningful to their lives. And it really was a great thing to have done, because it enfranchised a whole lot of people. Jimmy Allen: I want to return to the way you bridled at the phrase relentlessness versus ruthlessness and the way you jumped in and said, "Yeah, but Jimmy, we won in an ethical way." Because I don't think the Audible story can be separated from the phrase caring and from your unique vision of what matters there. So, I just want to give you a moment to talk about that, because I think you can't talk about Audible without talking about it. Don Katz: Relentlessness is grit in the inability to give up and basically saying that, "We won't give up and we won't fail and we won't be destroyed and run over as the pioneer, because we will continually disrupt ourselves moving forward." But the final segment of the people principles is about activate caring, and it's probably the most complex and layered and philosophical section. And it is also the reason we moved our headquarters in 2007 to Newark, New Jersey. And it basically, a lot of the reason we decided to move into a challenged urban core was this idea that with the activate caring sensibility, which is not about being nice, it's more layered than that, you actually could disrupt generational poverty. You could actually reclaim, and I write about this, a sense of the American dream of the exceptionalism of equality being the experiment du jour that you could actually be a successful company that grows jobs and rubs them off. You can have what I preached were replicable, scalable, and transferable innovations where you take the innovation capacity of a company as creative as Audible and you apply it to social disequilibriums like generational poverty in one of the most challenged cities. And people actually flock to work at Audible because of this. Jimmy Allen: This activate caring, do you feel it leads to you recruiting better leaders, or do you think the mindset also creates better leaders? Has nothing to do with leadership? Don Katz: I think the mindset, well, the mindset defines a company that I think certain kinds of people would be proud to say they work for. If you look at the quality of the products' impact on the customers, and then you look at the way the company rolled. And I was in one of the better articulations of the kinds of programs I believed were innovative. And frankly, I still think that the core and the soul of the company retains some of these values. I don't think they're for everybody or every company, but it's amazing how many founders of small companies have sought me up because of the people principles, because they would like a company birthed in this image. Jimmy Allen: Don talked about Audible's purpose at every level of the company. This is the essence of founders mentality, the focus on the why, the insurgent mission, the founding impulse, the reason you exist. But he also focused on the how. How do you create common instincts for growth? Don used the art of storytelling, conversations, not aphorisms, co-creating with pioneers, leaving space for new chapters. I'm an Audible fanatic, I'm also a Lego fanatic, and there's a link here. Two decades ago Lego lost its way, failing to manage the managers. It had so many different business lines, it had forgotten the brick system that made it famous and the Lego idea that we learned through play. The family brought in a new CEO, Jorgen Vig Knudstorp, who stripped the company back to its core and focused again on the why, the core purpose of Lego. And they've gone from strength to strength since. And I think behind every great company is a leader focused on the why, telling stories of purpose, launching a thousand conversations about why the company must exist. We've been collecting these stories, and there are dozens of them featured in the CEO Forum community. For more info, check the show notes and if you want to read Don's people principles, and I highly recommend you do, we've linked you up there too. Now we're back to Don with some rapid fire questions. What's the one thing you learned in business that you've taken home to the family? Don Katz: If I had to choose one thing, it would be that a life focused on artistic expression and building a huge company have more in common than you'd think. Jimmy Allen: Love it. What brings you energy? Don Katz: Well, what brings me energy is intense physical activity, largely ice hockey, even at my advance, whatever it is, my 67th year of playing, or exercise. Jimmy Allen: Okay, and what drains you of energy? Don Katz: People who can't see the world through other people's eyes. Jimmy Allen: What's the best advice you ever received? Don Katz: I think it's live knowing that people only die when they're forgotten. Jimmy Allen: What's the worst piece of advice? Don Katz: Whenever you need money for a venture, sell equity. Jimmy Allen: That cuts a little bit too close to home. Don Katz: I think it does. Jimmy Allen: Okay, so let's recap some key takeaways from our conversation with Don. Don Katz: Focusing on the character of a cultural mission that worked backwards from a deeply, deeply aggressive vision of the possible and never stopping that. Jimmy Allen: An exceptional leader starts with the why. If you can answer that, the rest will follow. But if you can't, I mean, why bother? Don Katz: The inputs and the outputs would never be financial at the beginning, and that basically it had to be disruptive inputs that you measured your success on that eventually became dollars. Jimmy Allen: To manage the managers you have to remain the insurgent at war with your industry on behalf of underserved customers. Look, the financials will be a consequence of this. Don Katz: Audible's people principles celebrate who we are and where we've been, and guide the way we work shoulder to shoulder to enhance the lives of our millions of customers. Jimmy Allen: You've got to close the gap between the CEO and the front line. As a leader you must start the conversations and then shut up and listen. Only then will you get great stories like the one about dreaming in color. There's nothing more fun than hearing about a feisty insurgent waging war on the incumbents. I mean, who doesn't want to break things? But of course, life isn't always that simple. A great CEO must build a company that meets the needs of all stakeholders. That demands you meet expectations today and build the right businesses to win tomorrow. How do you do two different things? Hit near-term targets to keep shareholders happy, and develop the next generation of products you need? But we're going to talk about that in our next episode. We'll be talking to Nirav Tolia, CEO and co-founder of Nextdoor, and he's going to talk about the essential concepts of deliver and develop.