How I Helped Create Hollywood Blockbusters While Making $Millions Selling a $300 iPhone App

($300 for this?!)

($300 for this?!)

Warren Buffett says “price is what you pay, value is what you get”

But would you pay $300 for an iPhone app?

Jessica Livingston and Paul Graham are famous in the tech world. They were the first people  to start a tech “incubator” where investors put money into a lot of different startups at once and advise them through the early years. Today their incubator is worth an estimated $500MM and has produced companies like Reddit, Airbnb, Survey Monkey, Heroku and Dropbox.

Paul also writes about startups and has a famous drawing he loves to shares with founders:

(small group of very urgent users)

(small group of very urgent users)

Finding small groups of users who urgently want or need a product to solve their problem is more important than making something that seems useful to a lot of people, but isn’t.

Microsoft started with a small group of customers urgently demanding their product (an Altair BASIC interpreter), Facebook started the same way, &c. Because once you have traction with those users, you may be able to scale, as Google did. His drawing points out that although it is tempting to think a site like a social network for pets sounds like a good idea, it is better to solve problems for a small group that throw “things” at large groups of people that won’t use them (Pet social networking).

(this sign is in 3D in the hills above LA)

(a 3D sign in the hills above LA)

2010 was the age of 3D, remember? No one could get enough. It was everywhere and our company went public that summer, at the height of the fervor.

I flew to New York for some business meetings and to attend an outdoor screening of “Monsters vs Aliens 3D” in the new Brooklyn Bridge Park. I did a deal so our technology would be used in the first outdoor 3D movie screening of its type. 1,000 people were expected, 5,000 showed up including the mayor who gave a little “I like 3D, this is awesome” speech.

(unfortunately he wasn't there)

(unfortunately he wasn’t there)

Then I went to Tribeca Film Center and did a deal with Robert De Niro’s team. Everyone at TFC became my friends, as did 1/2 the studio and post production world in New York. And the New York Technical Institute, Brooklyn Academy of Music and all the screening rooms, even the private ones of famous directors and producers.  And I got to know everyone at SoHo House and did a deal for their screening room, too, so I’d be at SoHo every time I went to NY seeing all the famous people do the things they do.

I was hustling deals with every studio or production company I could find, and got the same feedback: 3D is hard to make. We need it to be easier. Our screening rooms need to show good content.

But did you ever stop to ask why 3D came back so strongly? It’s a very hard medium to work in, to film in, and to produce/post produce.

Shooting live 3D (like “Gravity” or “Avatar” or “Hugo”) is more expensive and time consuming. Using two cameras simultaneously is aggravating.

(it was powerful and saved $$$)

(powerful, interactive & solved a huge problem)

Companies were raising huge amounts of money to provide a 3D production service where they’d send vans full of engineers to sets and “assist” shooting. But they’d wing it. Most of the work still happened in post production and these vanloads of engineers would charge $hundredKs.

The public didn’t know and didn’t care about the difficulties. All everyone knew was 3D is huge and “the future.” We checked our stock price in the cab to the airport – $18 – $20 – $21 – it went up and we counted our money (even though we were locked up for 6 months).

The windows were down and the sticky New York air hugged us.

It was summer.

It all felt right. If I closed my eyes I heard “Empire State of Mind” in the background, distracting me from the smokey piss smell in the cab. There were challenges but we were riding the high tide and I kept my eyes open for more opportunities.

And in the middle of it I got a call from a friend who said “hey so I’m building this app and I wanted to see what you thought of it.” Of course I said “I’d love to see it.” It was early but he modeled the complex calculations and instructions of filming movies in 3D on an iOS platform – as an app. It was amazing.

(simplified complex calculations

(simplified complexity)

It wasn’t super pretty and clean yet but it was beta and its potential was clear:

An iPhone app that makes filming in 3D easier by giving Directors of Photography and Cinematographers the calculations they needed to properly shoot. It reduced setup time and improved shot quality, saving huge $.

I’ve been on tv and movie sets since I was a teenager. My oldest brother has made films and tv shows in Hollywood for almost 30 years and I’ve hung out with him at 3 of his 10+ shows, getting to know the organizational structure and watching filming take place. I found out what each person did.

Cinematographers and Directors of Photography make the important technical decisions for directors and producers.

(interactive virtual set)

(interactive virtual set)

So when my friend Ken Shafer of Innoventive Software showed me his idea we immediately partnered and a few months later launched “The RealD PRO Stereo 3D Calculator for iPhone”…then the iPad version.

We had what Jessica and Paul would call a “small, urgent group of users.” Because we were solving enormous problems for them. This app literally helped make some of the modern 3D blockbusters, which is partially why 3D took off so heavily, and made Cinematographers’ jobs easier. They could shoot and adjust real time.

We priced the app at $300. One of the top 10 most expensive iPhone apps ever. At that price, we didn’t need 10 million downloads to make som money. But the price was significantly below the value it brought to the users.

We sold thousands of them within months.

All the filmmakers and cinematographers bought it. 3D enthusiasts bought it. Braggarts bought it to show off.

Most of the 3D movies you saw in 2010-2012 used the app on-set. It saved them tens-of-thousands of dollars, sometimes that much daily, so $300 was a bargain. We probably could have charged more.

After a year or so we dropped the price to $69. Today you can get it in the app store for $54.99. We launched a lower featured consumer version for $29 which now sells for $9.99.

The app made over $1MM in revenue within the first 18 months, and is still selling.

We created a tool that virtually eliminated vanloads of engineers and ushered in the production of 3D content everywhere.

We could have leveraged the app and created other similar filmmaking or entertainment products to grow our user base but didn’t. That’s another story I probably won’t ever write about (and since I did this on behalf of a company I was not receiving the windfall from the sales of the app).

It proves you can throw out what anyone tells you about how to do something and focus on the value, not the price.

Find a product-market fit with a solution to a problem, serve those customers well, then scale.

Even starting with a $300 3D app for your iPhone.

Download it in the iTunes store here.

How To Run 50 Miles (part 1)

(these guys are running 100 miles. let's start with 50)

(these guys are running 100 miles. let’s start with 50)

You may have just finished the 33rd Annual ING New York City Marathon, in which case you might agree:

Running can be miserable.

While running I’ve been:

Screamed at by passing cars in the middle of nowhere and black-smogged by those jacked-up diesel engine redneck trucks (you know the kind with tennis balls hanging from the trailer hitch).

(yah. that's the one)

(yah. like that)

Warned by a US Navy Seal “You are in a restricted zone with unexploded ordinances. Go back the way you came. IMMEDIATELY.”

(if ever I am sponsored, I want it to be Honey Bucket)

(Honey Bucket please sponsor me)

Hit with runner’s distress more times than I can count: squatted in a patch of recently mown poison oak (I didn’t know, obviously), relieved myself behind bushes a few feet from other people who are lucky they didn’t look over, relearned how to pray (“Please, God, let there be a Honey Bucket!”) and sacrificed more underwear to the trail gods than I care to remember.

I’ve bonked* in the mountains 10 miles from home, cramped badly hobbling the last couple miles, and suffered from heat exhaustion while running in 100 degrees through the desert.

Jumped over rattlesnakes, chased by coyotes, gotten way too close to a mountain lion, brushed up against tarantulas, been sunburned, stung by bees and bitten by ticks.

Rolled my ankles so many times that it doesn’t phase me, and suffered from near hypothermia as rain and ice poured down on my jacketless body.

I even ran on a broken leg once. Yes, it hurt. No, I didn’t know it was broken.

This year I projectile vomited at 1:30AM on a rural highway in Oregon. Four times. (it looked pretty awesome in the light of my headlamp but scared me thinking I was not going to finish the race (it could have been an instagram that made even @JoseCabaco proud) note: later diagnosed with e-coli)

(a first time for me, but it was at night and looked awesome in light from my headlamp)

(like this but at night and looked awesome in the light of my headlamp)

But I still run. I can’t stop. I’m an addict.

I just spent a week living in a van like a dirtbag, sleeping in parking lots and weird places, running remote trails on Maui because it was one of my dream trips. If that doesn’t say ‘ADDICTED’, I don’t know what does.

But my torture is your salvation.

There is no logical reason to run 50 miles. None.

There is no rainbow. No pot of gold at the end. No leprechaun.

(this will not be there)

(this will not be there)

You will not get rich. You will not get famous.

You will suffer. You will question yourself. You might burn your skin and get bad blisters. If you’re not prepared, you could get dehydrated or overhydrated.

Your body could fail. Your kidneys could shut down.

You may lose control of your bowels.

But a few people out there still want to do it.

I get it.

And you know what? They can.

I’ve seen 77 year old women finish ultramarathons.

(at 70 he's run the 135-mile Badwater Ultra 14 times)

(at 70 he’s run the 135-mile Badwater Ultra 14 times)

If you do, it will change your life. It will change your context and your perspective.

When we look at our bank accounts, our jobs, people driving fancy cars, the things we always wanted to do but haven’t, we sometimes lose our way and think those things are bigger than us. We need to remember. We are humans and we are bigger than anything material that we’ve created.

Doing something you never thought you could makes you realize that if you can do that, you can do anything.

You are bigger than money or cars or jobs or skyscrapers or 50 mile races. You are part of what created those things. You are not a victim. You can manifest anything with the right focus and effort. You are still alive.

If you don’t want to run 50 miles. Stop here.

If you do, I have to warn you.

I’m a running hacker.

I’ve never done a marathon (at least not a sanctioned one).

I hate running on pavement.

I want to do the most by putting out the least effort.

I may not be fast, but I can go forever.

In 2009 I got ready to run The Leona Divide 50-mile Ultra in 4 months. Since then, I can pretty much run anything up to 30 miles with little preparation more than my standard running schedule, and this training method.

I don’t cramp. I don’t bonk and I don’t stress over it.

But how is this possible? People kill themselves getting ready for 26.2 miles.

They cramp, they puke, they bonk, they cry.

But I don’t:

Because most of what people do for marathons is wrong.

Much of what you’re doing is probably wrong.

Because you’re trying too hard and ignoring your nutrition.

Running a long distance is possible (unless you have a condition that makes it particularly difficult); it’s a 3-step process:
1. Stand
2. Walk
3. Run

And the key to everything, the under-appreciated and under-discussed secret – is your nutrition.

You have to eat and drink while you’re exercising or your body will shut down.

More importantly, you have to eat and drink certain things. The right things.

Someone once said to me “I feel like you’re one of those people who just got up one day and decided to run 50 miles and did it”. I was slightly offended by this because it’s not that simple. I put tons of work into preparing, it just wasn’t traditional preparation. Then again, I’ve always been an outlier.

I may have never run a marathon or been stereotyped as a “typical runner” going out and working my way up from 5k races to marathons to ultras, but I did something different that applies to any endurance sport: I gained experience bagging alpine peaks, competing in 8-12 hour cycling or adventure races, and climbing long technical rock routes in Washington, Oregon, Montana and elsewhere.

I spent hours reading books on endurance nutrition and testing theories. It was almost 10 years of learning, trial and error. Then after all of that “I just got up one day and decided to run 50 miles…”

It was during those adventures that I found secrets – what works and what doesn’t. Especially for nutrition.

Here are the secret nutrition rules no one ever told you (probably because they never knew):
1. you can only absorb 16-20oz of water per hour
2. you can only digest ~300 calories per hour
3. the wrong kinds of foods will not only upset your stomach (runner’s distress) but will also cause your endocrine system to go berserk. Mass changes in insulin cause mass changes in energy. Eat the wrong thing and you may bonk or worse.
3a. if exercising <2hrs you can get away with long-chain carbs and electrolytes in energy drinks and that’s it
3b. if exercising >2hrs you need to add electrolyte supplements and protein to your fuel plan to avoid body cannibalization (i.e. your body breaking down muscle into energy)
4. your body has a certain amount of muscle glycogen stored up within muscles and your liver. for me, it’s about 54 minutes of intense exercise. You may have more (up to 90 minutes) or less. Beyond this threshold you need to eat and drink.

These rules mean you will always be operating at a caloric and hydration deficit during endurance events and there is nothing you can do to change it except ingesting the right things at the right time in the right amount.

If not, you will bonk, DNF or worse, during races – they may train hard (even too hard) but they lose when it comes to their food and drink.

Ingesting proper food and drink will save you, even if you’ve undertrained.

So This Is What You Do
Combine the secret rules above and this becomes your formula for success:
A. For each hour after your initial hour (or whatever your limit is for not needing food) of exercise, you should drink no more than 16-20 oz water and eat no more than 300 calories per hour. If you know you’ll go for a long time, you can start eating and drinking as soon as you start exercise.
B. For exercise beyond 2 hours at a time, you should supplement with concentrated electrolytes and protein supplements
C. Once you finish exercising you should eat recovery food immediately that consists of a combination of electrolytes, protein (like whey) and fortified with something that will quickly replace muscle glycogen (like glutamine)

Chances are, you’ve been eating too much or too little, drinking too much or too little and haven’t been supplementing with electrolytes: all your bonking, cramping, and other distress is for naught.

In other words, you’ve been torturing yourself trying to get better and thinking you’re not capable when the secrets were right there hidden out of sight.

If you master nutrition, you’ll master ultra-marathons (or marathons or whatever athletic even you’ve always wanted to do).

(me just before I ran Haleakala, Maui rim-rim October 26th, 2013

(me just before running Haleakala, Maui rim-rim October 26th, 2013

If you’re just starting out, heed this advice: it’s critical for performance and will save you a ton of trouble. Your training will be less painful, more fun and your gains will happen faster.

At the end of the day, if you get nothing else, you will at least appreciate your couch a whole lot more after running 50 miles.

(part 2 of this post will explain the running regimen that will train you without killing you, and I’ll tell you the supplements I use when training and heading out for long runs)

*Bonking is a term that means you feel like your body can no longer move; like you’ve overexerted yourself and run out of gas, whiich, in a lot of ways you have

The Phone Was Dead – 5 Things I Learned From September 11, 2001

20130911-180110.jpg
(we saw this outside our office window)

We pulled up the blinds of our office window on the 23rd floor of the Chicago Board Options Exchange building as an FA18 fighter jet burned past.

All air traffic was halted. The Chicago skyline was silent except for the jets loaded with live missiles and the haze wallowing over the South Side.

We could see the pilot’s head through the cockpit canopy.

An hour earlier we arrived for work. I had moved from trading on the floor of the exchange to our office. We had the news on all day, starting at 5am.

CNN showed smoke pouring out of a hole in the tower.

The second plane hit.

We’ve all seen this 1,000, perhaps 10,000 times.

But it was different for me.

On the floor of the CBOE our pit was responsible for making markets – offering retailers and street traders prices so they could buy and sell options with us.*

Several times each day we were on the phone with traders and brokers working from the towers in New York.

20130911-175910.jpg
(they where there on Monday, then they were gone)

We talked to Cantor Fitz every day.

They were mostly professional conversations, but during slow times there was small talk. How’s your wife? Where’s your daughter going to college? Dirty jokes were shared. Pranks were played. “We have to get drinks when you come to New York” they said.

The drinks were never gotten.

Sometimes I wonder if anyone I saw jumping from the towers on TV were the guys on the phone.

But when we saw the fighter jet blast by, a switch flipped and I knew it wasn’t an accident.

I left.

The El** in Chicago was packed with people and the one guy with a portable jogging radio (pre-twitter and smartphone) relayed the reports to our train car while everyone else was silent.

“Oh my god the second tower fell”

“The Pentagon is still burning”

“There may be other explosions”

People were crying. Cell phones weren’t working.

We were trapped in the train car alone with each other. Strangers were hugging. It’s the only time in life that I’ve been with a group of complete strangers and we looked each other in the eyes with pure empathy. Everyone cared.

It was 15 minutes on the Brown Line to Armitage in Lincoln Park, it may as well have been 15 hours.

My best friend Rich, his friend Brad and I went to Mongolian Barbecue and drank beer.

We talked about the people we knew in NY, and what was important to us.

Some of the guys in NY were lucky – missed a train, got a late breakfast, had the flu – and lived.

But we were alive, too.

I was 23 and had been trading almost 4 years. I felt old. I was stressed out all the time. I was driving up to 10 hours on weekends to get away from concrete and corn field.

I was afraid. I wasn’t happy, but uncertainty seemed scarier.

I also realized I wasn’t in control. A bomb could go off, a plane could crash, a train could derail, a zillion other things could kill me that day. I’m surprised more people don’t die by all the things that could kill us.

I told the firm partners I was moving to Oregon where there were mountains, rivers and oceans. Changing my life took me 10,000 strides closer to happiness.

I realized 5 things on September 11, 2001 but took 10 years to understand:

1. We all care – Everyone cares but we don’t extend empathy to strangers very often because we’re all fighting our daily battles. Extending empathy to a stranger once every day makes me realize there are bigger things at play than me.

2. My world is made up and I’m in control – Everything in my world is a result of my own mind and my own decisions; fear can be fought with ideas and ingenuity. Ask “how can I do this” and write down ideas. This will empower you and build your own reality the way you want it to be. Everything is an experiment.

3. I’m not in control – We can’t control others, so any day could be your last. I try to make sure the people I love know I love them, and I try not to kill anyone.

4. Happiness is a choice – Losing things can make you realize what you had and what you have left over. When I feel poor or constricted I count the bounty: there are hundreds of millions of cars on the road, food in every market and every little diner across the country. Thousands of new businesses started every day. Count the bounty.

5. Have faith – Believe in something. Believing is the first step to finding purpose in life.

At the end of the day we tend to think we’re here alone, but then something horrific happens and we realize we’re here together.

But we’re alive and we can pass the torch of those in the past by being better than we were yesterday.

To my friends and acquaintances and the families of Cantor Fitz, my thoughts are with you.

20130911-180258.jpg
(thanks to Mr. Lutnick, Cantor Fitz has thrived since 2001)

* We made the market for UAL – United Airlines – and 10 other underlying stocks.
** The El is Chicago’s subway system. It’s short for Elevated Rail.