MGA Entertainment: Isaac Larian
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I went to a guy named Ron Stover who was a buyer at Walmart. Very tough to sell products to. I can't be the next doll. He said, no. One day he took me to Walmart and showed me these 98 feet of Barbie products. He says, Isaac, you see these?

They own 90% market share. They sell and I make my bonuses every year. I said, Ron, what if I came up with something better than Barbie and you didn't buy it? You're going to feel left out. So I came back and told my design team, give me something that competes with Barbie.

Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Isaac Larian took on Barbie with a new line of dolls called Bratz and built MGA Entertainment into one of the biggest toy companies in the world.

There's a reason why most of us love rags-to-riches stories. They speak to the idea of possibility that even in the most miserable of circumstances, there might be a way out. It's why people like Oprah or Jay-Z or J.K. Rowling inspire us, because they all remember what it was like to worry about how they were going to make the rent.

We've told a few of these kinds of stories. You might remember our episode with Howard Schultz, who grew up in a housing project in Brooklyn, or media mogul Haim Saban, who sold pencils on the streets to help out his family.

Well, today we bring you a story that begins in the slums of Tehran, the capital of Iran in the 1950s. This is where Isaac Larian was born and grew up. And at age 17, with just a few hundred dollars in his pocket, he arrived to Los Angeles with almost no English and only one contact. Isaac would go on to build the largest privately owned toy company in the United States.

It's called MGA Entertainment, and the company is probably best known for two products, LOL Surprise, which is one of the hottest toys in the world, and Bratz, the punky, streetwise dolls that, at one point, knocked Barbie off her market-dominating pedestal.

MGA turned Isaac Larian into a billionaire, which on the face of it isn't that interesting to me or to this show. But to go from zero to a billion, well, that's a really hard thing to do. And so this story is, of course, about how he did it and how a nearly decade long legal battle with Mattel almost killed him.

But most importantly, Isaac Larian's journey is also about why ego is truly your biggest enemy when building a business and why the word no is actually the beginning of a conversation rather than the end. Today, at age 70, Isaac still runs MGA Entertainment. But as a kid, he was an outsider growing up as a minority, in his case, Jewish in Iran in the 1950s.

We lived in actually in the really the slums. No running water, no light. And we lived there with my aunt and my two, three other cousins all in a two bedroom house. And you had a very big family in Iran. Huge, yes. Everybody was working so hard. I was working since I was nine years old.

My mom started buying clothes out, textile, and making, she was a good... Seamstress? Right. And made dresses for the neighbors. And she, my mother, supported us and the whole family. You know, my mom had me when she was 15 years old. Wow. Wow.

I read that when you were a little boy, you actually witnessed your dad actually getting beaten. Yeah. My father was a textile merchant, and he was a good entrepreneur, but he loaned money left and right to these so-called friends and family. They didn't give him back the money, and he went bankrupt. So one of the creditors...

One day walked into our house with another big guy, I remember. I opened the door, they burst in, and the guy demanded money. And of course my father didn't have money to give him. So they started beating him with this big stick until he was bloodied and on the floor. I was crying profusely.

My mother was crying, my little sister was crying, and then they left. They said, "Pay me."

Or we come back and they left. It was like a mafia shakedown. It was. And that was a defining moment in my life. I told myself, one day I'm going to have so much money that nobody in my family is going to suffer from poverty. You were eight years old. Yes. I mean, certain things as a kid, when you put in your head, it doesn't go away. Yeah. When we lived in the slums, there were a lot of uneducated kids

that basically were kind of fundamentalist. And I remember being beaten up by the bullies in the neighborhood because I was Jewish. I was getting beaten up so bad. One day when I came home, I think I was about seven years old,

from school that I was all bloodied and my mother told me that if you ever come home again bloodied, I'm going to also hit you. Go fight back. By 9, 10, 11, I had made two dumbbells from two bricks and a piece of wood and

And I remember that, and I was exercising to get stronger. And, you know, one day when the neighbors gathered around me with the biggest bully in the neighborhood, his name was Mortaza, he started beating me. And I started hitting him back so hard until he was on the ground. And since then, he became my friend. So they didn't bully me after that. Huh.

So I guess in 1971, when you were a teenager, like 17 years old, you decided you wanted to come to the United States. And you ended up in Los Angeles because I guess you had like a friend who had moved there. And I think you were studying or planning to go to college and study engineering. Right. But this is I mean, this is obviously a big step for you. Right. I mean, you were pretty young at the time.

Yeah, so to be honest with you, Guy, I was scared shitless when I got here. When I came here, my mom borrowed $753 from me.

Wow.

By the way, did you speak much English? No, no, no. How were you going to get through university? When you're 17...

and you have grown up with hardship through the slums, you have a feeling of invincibility, and you have a feeling that, okay, I'll learn it. It's not difficult. I was trying to teach myself English. I bought an English-Persian dictionary, and that's what I was reading every day and getting L.A. Times trying to read that and learn from it, trying to watch TV and learn from that.

But I had no idea. But you have to get a job. So what did you do? Yeah, so within a month, I was down to 25 quarters in my pocket, and I had no idea what the hell am I going to do. So I started...

walking literally on La Brea Boulevard. I walked for 11 miles one day, going to every gas station, 7-Eleven, you name it, asking for a job, and everybody said no to me until I got to a place called Spires Coffee Shop and asked them for a job. And they said, sorry, they have nothing open. And so they're behind the...

counter was this guy with a white hat. He was a cook. You could see it when you were sitting in the coffee shop. And I left. I started walking back, really crying. And he came and put his hand on my shoulder and he says, he told me in Farsi, Iran, yes, are you Persian? And

And I said, yes. He says, are you hungry? I said, yes. He said, come back. He made me liver and onion, which I still taste and I still go once in a while there to have it.

It tasted great. Wow. It just happened that he was Persian. Right. He saw you there. Right. Yeah. So, you know, my wife says, you must have had angels on your shoulder along the way all your life. So, uh,

So he told me the only job that they have is graveyard shift, washing dishes. And it's from 11 to 7 in the morning and pays $1.65 an hour. And I multiplied $1.65 times the Persian rial. I said, oh my God, that's a lot of money. Yes. Yes.

I took the job. I said, yes, I took the job right away. All right. So you get this job at this restaurant called Spires. And over time, I guess you worked at a bunch of different restaurants while going to college. You went to college and eventually graduated. You got a civil engineering degree from Cal State LA. Right. And I guess your plan was to what? To like go back to Iran and go work there? Yes, it was. So when I graduated...

I went back to Iran to see what's going on. But when I went to Iran, it was fascinating for me. All of a sudden, the streets looked a lot smaller than I remember them. And the revolution was happening. And I said, you know what? This is not for me. I'm going to go back. So the revolution was underway, the Islamic Revolution, which would obviously transform Iran. Right.

You knew that this was not going to be the place for you to start a life. Right. No. I just said to myself, this is not for me. I'm not going to do this. I'm going to go back to America. Did you try to encourage your mom and dad and the rest of your family to come too? Yeah, I did. And my dad was very stubborn. He says, no, this is where we belong and we're not coming.

I brought my brother, younger brother, to America. This is Farhad. Yeah, Farhad. And eventually things got so bad that I was pushing for my parents to come. And they basically were smuggled across Afghanistan, across Pakistan, literally on horses and back of pickup trucks.

And they applied for a refugee visa. And they finally got that and came to America. Wow. And I guess in the meantime, you had already come back to Los Angeles. And this time you came back with your brother, Farhad. And...

And I guess you started a mail order business in L.A. called Surprise Gift Wagon. What did you sell? Brass giftware. These are like little figurines, unicorns, etc. Right. And then eventually you moved into selling consumer electronics. What was the name of that company? We called the company ABC International. And the reason I chose ABC because at that time there were yellow pages everywhere.

And I wanted the company name to be- Right at the top. Right, exactly. Exactly. But basically, Sony Walkmans had come to America. Yeah. And they were in big, big demand. And I had learned about importing with Surprise Gift Wagon.

So I started looking for, in Japan, in Singapore, in Hong Kong, literally I would get the yellow pages from those cities and go look for electronic retailers. And then I would buy from them because they were selling them cheaper in Japan than they were selling it in the USA. And I would import those things.

10, 12 pieces at a time and selling them. Wow. And would you go to Tokyo and to Hong Kong? Yes, I finally, yes, did go first time to Tokyo. And I thought, wow, I'm in heaven, all those electronic stores. And literally, I had at that time saved about, I think, $18,000 in

And I would go to store to store. Do you have Sony Walkman 3? Yes. How many do you have? Four. I buy all four of them. Then I would take it to the hotel and come back again. And one day, one store told me, you don't have to do that. You can just put it in a taxi. They'll take it to the hotel and it will be there when you get there. I couldn't believe that was going to happen. You do that in New York or LA, you probably won't see it. They'd keep it.

And did you just pack your suitcase with all this stuff and then come home? Yes. And then you would take out ads and magazines for Sony Walkman and then you would just, and it was like arbitrage. You could just buy them cheaper and sell them for double the price. Exactly. Wow.

You started this business with your brother, Farhad, who I think goes by Fred now. And tell me about how that business went. I mean, you were basically, you just take out mail order and sell Walkman. Yes. But again, I wanted to go bigger. So there was a company called Olympic Sales selling Sony Walkmans, Apple computers, etc. So one day I put...

18 of my Sony Walkman trees in the trunk and went to the store. Went upstairs and asked for the owner. This short French Moroccan guy walks out. He says, I'm Francis Ravel. I said, I have Sony Walkmans. And he says, are they stolen? I said, no. He said, how many do you have? I said, 18.

So I went to my car and brought them up in the lobby and showed it to him. He examined all of them. He still didn't believe that they were original. He says, okay, I'll buy them, but I give you a post-dated check. It's only valid two weeks from now. Because he wanted to know by then he would find out. If they're going to fall apart, yeah. Yeah, exactly. And boom, the post-dated check cashed.

And I had made $40 a unit in profit. I said, oh my God, this is big. How big was that check that he wrote you? I think that check was literally 18 times $130 each. So it was a big check. So you went beyond Walkman, I'm assuming. Oh, yeah. I went to all kinds of consumer electronics.

I was called the king of gray market because that's what it was called, parallel import. It's called gray market. How did you get a better deal than, you know, Circuit City or some of these bigger companies? They were buying from...

the manufacturer representative in USA. First of all, there was a shortage. Like they would buy it from Sony of America. There was a shortage. Secondly, Japanese companies sold the product in the USA at a much higher price than they did in Japan or Singapore or Hong Kong. So I had two things to my advantage. I had the supply and

And I had a better price and they started buying from me. And I'm just curious, when you're buying them directly from Japan, do they have like Japanese characters on them? Or was it in English? It wasn't in English, right? I remember seeing those Walkman. I probably bought one of your Walkman because people are like, wait, I can't read this. What does this say on the thing? Because it was in Japanese. Yeah, it was in Japanese. And I went and there were people who were complaining. You were the guy who got me my Japanese Walkman. Yeah.

But you bought it cheaper. I did. I got a good deal. But people would complain. They would say, I can't read this. Yeah. So I started translating the instruction to English, making photocopies and putting it in the units. I mean, how big did you guys get? I mean, how big did ABC Electronics get? What were you doing a year in revenue? We were doing $70 million in a year. Wait, what?

70 million at your height. But that was, I mean, that must have come a few years later. Yes, of course. Yeah, it came a few years later, but this was huge. Wow. Yeah. That's unbelievable. And this is, 70 million dollars. So you were...

At this point, I'm assuming you were selling to not just consumer electronics stores in L.A., but all over the U.S. Yes, I was. I was selling it all over the U.S. I sold it to Crazy Eddie in New York. I sold it to everybody.

How does a guy from Iran named Isaac Larian with no connections, how is he able to find the best deals? I mean, I know this is going to sound, you know, a little bit of a cliche and forgive me, but you did come, you did grow up as a boy going to the bazaars, negotiating for textiles, right? I mean, so I'm assuming you probably had that skill. Absolutely. Right, that you could find a deal. Yeah. And the funny thing is my son Jason, when he was growing up,

He was, I think, 22, 23. And we went to Bloomingdale to buy suits. And I picked two and he picked one. And I told him, go ask the guy for a discount. He got red in the face and he says, Dad, this is not the bazaars of Tehran. They won't give you a discount. I said, trust me, we are buying three. They will give us a discount.

And he says, "No, you're embarrassing me." So I went to the salesman, I said, "We buy all these trees, I want 15% discount." He says, "No way, we cannot do that. This is Bloomingdale." I said, "Okay, then we won't buy it." And my son was so pissed off. We walked over to the elevator and guess what? The supervisor came and says, "Sir, okay, come back. We cannot give you 15%, but I can give you a 5% discount."

Everything is negotiable. You know, I knew the salesman at Bloomingdale make 15% or 20% commission. So, okay, give me 5% of it. You still make 10%. It's more than zero. Amazing. I need to go clothes shopping with you next time. Yeah, come. You need to be my personal shopper. Okay, so this business is getting really big. And I guess there was something that happened, and I remember this because I was a boy, and

That you basically got the license to distribute these Nintendo game watches. And I remember they were like these rectangular little games and they had a crystal LED screen. And you could play like Pong or, you know, basic games with two buttons. Donkey Kong. Donkey Kong. Mario Brothers. I had a bunch of them. They were like little squares. They were, you know, about...

as thick as like 10 credit cards stacked. Exactly. This blew up. This was a huge, huge thing for you, right? Yeah, it was a huge thing because I was reading Wall Street Journal and Nintendo had become...

the king of consumer electronics, and they've done $5 billion in sales. It was crazy. This was in like, what, 1986, 87? Yes, exactly, about that time. So I went to, I found out where their headquarter is, was in Kyoto. And I literally took the bullet train, went to their headquarters, and

and asked to talk to the export manager. And if you have dealt and you've been in Japan, you don't just walk into some place and say, I want to see the export manager. So the receptionist picked up the phone, said something in Japanese on the other side, and said to me, sorry, not available. I said, what's his name? And then she did the same thing and says, sorry, cannot give you the name.

So I said, "Okay, I'll wait until he's available." So I sat there and there's this big tall guy, walks, talks to her, looks at me and leaves and comes back from lunch and comes to where I'm sitting and he says, "I am Mr. Todori. What can I do for you?" I said, "I want to buy a Nintendo Game & Watch for America as a distributor and I'll pay cash and a little credit."

And he says, sorry, not interested. And I said, can I have your business card? Reluctantly, he gave me his business card. And I came to America and I opened the letter of credit for a million dollars, full wire to Nintendo attention message to Dory. And then I called him three days later. I said, did you get the letter of credit? And he said, yes, but I told you we're not interested.

I said, I just want to show you that I'm serious about buying and distributing Nintendo game and watch. So he says, okay, we can ship you in three months, but it's going to be all in Japanese packaging. And I said, that's fine. I'll take it.

And so I made the name of the subsidiary of ABC International, Micro Games of America. And that's how I started. So you were going to basically, these games came in, you were going to take them out of the box and repackage them in an English language box. Yeah, I did. Yes. Wow.

Wow. And this guy said no to you three times. Yes, he did. But that turned into a massive... Yes. That went bonker, like tens of millions of dollars in sales. Yeah, the first year. You know, when you're in consumer electronics, you're happy to make 8%, 10%. Yeah. In toys...

I was making 32% profit. And the first year I sold $23 million of Nintendo Game & Watch, I thought I've died and gone to heaven.

I mean, just the audacity to sit there and to have the guy look at you and say, I'm not interested. I mean, a lot of people would feel humiliated and walk away from that and say, OK, but it doesn't sound like you suffer from any feelings of humiliation. Like you don't care. No, I don't care. I mean, for a lot of people that would hurt their ego.

No, I didn't care. I tell my people the selling starts when the buyer says no. When we come back in just a moment, how Isaac decides to pivot once again from electronic games to dolls and sets a goal that seems impossible to meet. Build a doll that's better than Barbie. 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 Raz. So it's around 1987, and Isaac's toy company, Micro Games of America, has just had its first big success, importing and distributing the Nintendo Game & Watch. All right, so this is a huge, huge fad. I mean, I had them as a kid. I'm sure people listening remember Game & Watch. Right.

But I guess about, like with many things in children's toys, that was a fad that kind of passed, right? About two years in, sales started to fall. Right. Just because what? Because kids at a certain point moved on? Yeah, they were looking for something new. That's something I learned from that. Literally two years on.

I was sitting in $10 million of inventory. And it wasn't moving. No, and the interest rates were 19% at the time. And I had a line of credit with Mitsui Manufactures Bank. I didn't have money to pay them. So I liquidated that merchandise for $0.25 to $1. Oof.

So you saw that there was something in toys, but you also got burned by toys. Because I think when Game & Watch, kind of, that fad sort of passed, it was also the rise. Nintendo had another product that they released called the Game Boy, and you did not have the license for that. How come you didn't get the license for that? Because that would have made you tons of money. Yeah, so that's very interesting. Nintendo watched the success that...

Wow.

I asked for it. They wanted to control the distribution of it. Yeah. So you did not get the Game Boy license. No. And in the meantime, I guess the consumer electronics business was keeping you afloat, right? Yes, but I also decided to go to licensed companies.

handheld games. Handheld games like Nintendo, but for different franchises, like Star Wars and Batman and things like that? Exactly. So I got the license for Star Wars. My son Jason at the time was...

fascinated with Power Rangers. So I went to Haim Saban and got the license for... How you negotiated with that guy. I don't... Two master negotiators sitting across from each other at the table. I mean, I don't even know how that conversation...

It was fascinating. I got to tell you, and Haim, I don't know if he remembers this or not. So Power Rangers was so strong and we were selling so much. And I called him one day. I said, can I come and see you? His office was in Bear Bank. I have a big royalty check for you. So

He said, yeah, sure. I went there. He made me angel hair pasta. It was delicious. I gave him a check for $720,000. And guess what? Week after, he sent the auditors to come and audit us because he thought, and I still talk to him and laugh about it, because he thought I was cheating him. It could have been more.

But in the end, you were cleared. Oh, yeah. The editor came and said, no, they gave you what you... Yeah, exactly. And we became free. You never let them hear the end of it. If I'm here listening, Isaac is not going to let you hear the end of that. Yeah. Yeah. But, you know, fair enough. Fair enough. Listen, you got to be on your toes, right? Okay. Right. All right. So you're doing some licensing. Yeah.

I think a lot of what you were doing was electronics games. Right. But I think around 96, this guy named Joe Trucious, I think is his name. He came to you with a doll that he had created and he had pitched to Battelle, but they didn't want it. And it was basically a doll that bounced and when you bounced it, it would sing something like that. Right. Bouncy, bouncy baby me. I still remember that song. Yeah.

And he says, I want you to make this doll. It's going to be big. I said, come on, Joe. You have gone to Mattel. You've gone to Tyco. You have gone to Toy Biz. You've gone to everybody. Everybody said, no, why would you come to me? I don't know how to make dolls. And he said, they're stupid. They don't understand it. But you're an entrepreneur. You understand that this is a good toy. And so I said, OK.

Let me try it. So I took the sample to Hong Kong, sat with two factories who make dolls from metal. And I said, if you make these for $5, I'll buy 200,000 pieces. But did you, just going back for a moment, this guy was rejected by every major toy company, including companies that did dolls. You did not do dolls. You did electronic games. How come you thought, all right, let me do this? I mean, you knew nothing about this business.

I like the toy, you know, and I have the personality when somebody says to me, no, you cannot do it. I'll take that as a challenge. And I made the sample. I went and sold it to Toys R Us.

sold it to Target, sold it to Kmart. They all liked it. You pitched it to them and you showed it to them and they said, all right, we'll take it. Right, exactly. And at that time, you had to make TV commercials and put it on Nickelodeon and Fox Kids to sell the product. And you needed to have at least four major retailers in order to be able to afford to go on TV.

But then I went to a guy named Ron Stover, who was the buyer at Walmart, and he says, I won't buy it. I said, come on, Ron, why? He told me, Isaac, you are micro games of America. Nobody will buy a doll from a company called micro games of America. I said, Ron, I'm going to change the company name right now. I'm going to call it MGA. Okay.

And he says, you're too fast for me. Okay. All right. I'll buy it. And that just took off. Huge. Wow. And at the time, in order to get into those stores, it was like a chicken and egg thing. You had to have TV ads on Nickelodeon, which probably just the marketing of that thing was, what, millions and millions of dollars, right? Right. So they would demand...

that you have an actual TV commercial. Ready. When you went to pitch it, ready. You had to have a commercial ready when you pitched it. So you had like a VHS tape that you put in and you had like a big TV and AV system in a boardroom. And you're like, this is the commercial. Exactly. Wow. So you had to spend all that money just for the pitch. I had to spend $125,000 to make that TV commercial. Wow. Wow.

But by then, I mean, by that point, you were doing well. But MGA was still, I guess, a relatively, would you call it a small business? Or at that point, would you call it? Yeah, we were a small business. We were doing less than $100 million at that time. Okay, so very nice business. But tell me about what you took away from that experience with that singing, bouncing baby doll. Was your mind kind of blown? Or was there a moment where you thought...

uh-oh, this could be like the Nintendo Game & Watch. You know, we might be stuck with $10 million worth of inventory that nobody wants in a year. Yeah, so I was actually, I learned from my mistake, from my failure with Nintendo Game & Watch. And this time I did not buy inventory like crazy. I would sell to retailers on what you call FOBs, free on board. So they had to open a letter of credit and buy it. So they own the risk, not me.

And from one doll, we became, next year, we had Bat Time Bouncy Baby, we had Giddy Up Baby, and we became one of the biggest doll makers. So essentially, what you're saying is, unlike the Nintendo Game & Watch, which required you to buy the inventory, hold it, and then sell it, you sold the dolls already before they were manufactured. Yes, most of it. Wow.

Okay. So you've got the doll, but you're also doing a lot of licensing, as you mentioned, right? Because you've got the Power Rangers, and I know you did licensing with Pac-Man and Space Invaders. And so I wonder, so when did you start to say to yourself, maybe I need to focus more on building IP on our own property? Frankly, one of the things that was a terror for me was...

When I got the license for Star Wars, nobody wanted Star Wars. And the license for Star Wars was to make a handheld game? Right. Handheld games and walkie-talkies. Crazy. This is in the late 90s. Nobody wanted the Star Wars license. It's one of the most valuable properties on Earth today. It's crazy. Yeah. So I got the license. I got it pretty cheap and I got it exclusively. Because at the time it was owned by George Lucas. Right. Exactly. Exactly.

And then Lucas said he's going to make a new movie. And all of a sudden, the demand for Star Wars went up. But then I still have the exclusive license, and it's two years left of the contract. And when I went back to Lucas to renegotiate the contract, they said no. And they had given it to Tiger Electronics.

And that really pissed me off, to be honest with you, because I had worked all these years when nobody wanted Star Wars. And we ended up in litigation with Lucasfilm, which I won. But that really put a bad taste in my mouth. And I said, the hell with it. I don't want to work for these entertainment companies. I want to make my own IP. Meanwhile, I want to talk a little bit about something interesting.

that was happening in the background. This was your relationship with your younger brother, Farhad Fred, who was also your business partner because...

From what I've read and understand, there was tension between the two of you. You wanted the company to grow faster. He didn't. He wanted it to grow more slowly. Right. And, you know, Isaac, everybody's got family and family is sensitive. And so we talked about this gingerly. But I guess it got to a point where the tension was it just it wasn't working. And you offered to buy him out around 2000. Mm-hmm. And you guys valued MGA, your company, at $20 million. Right. Yeah.

Basically, he had about 45% of the company. You gave him about $9 million to buy him out. And that was it. He was out of the company. Right. Just putting aside the financial transaction, from a family perspective, what did that do to your relationship with your brother? You know, we had, frankly, I love my whole family. I love my brother. And it bothered me that the business became

like business situation like this happened. And I had offered him, because we were fighting every day, I had offered him either he buys me or I buy him. And I did buy him. And, you know, and I asked him to keep some of his shares in the company. And he said, no, thank you. Good luck. I'm going to go on my own. But unfortunately,

He sued me. Yeah. He sued you a few years later because of the success of Bratz, which he felt that you had known about it when you bought him out and that he would have made more money. And like anything, it's complicated. But of course, money can always tear apart friends and family. Right. Absolutely. So to me, that was really like a stab in my heart. It was...

In our culture, it's unthinkable. To sue your own relative. Yeah, exactly. You won the case, the court found in your favor. But I imagine it was very tense, did it?

What did it do for the extended family? I mean... Yeah, it created a lot of rift and issues within the whole extended family. I mean, Fred being the younger one, my mother started saying that, oh, no, give him money. You have made money. Give him some money. Give him the money.

And my dad, may he rest in peace, told me, I know you didn't do anything wrong. It is not your fault. He made a mistake, but please forgive him. And later on, we reconciled. But I told him, it's like when you have an expensive piece of porcelain and it falls and it breaks, you can get crazy glue fallout.

I put it together, but still you can feel the crack. Yeah. And you're not the first of the last brothers to have a rift. And it's hard when you're somewhat estranged from family. Right. All right. Meantime, so you buy him out. And sometime around, I guess, late 2000s,

You're approached by this guy named Carter Bryant, who was, I guess at the time he was a freelance designer. And he comes to you with some sketches for a new kind of doll. Yeah. But you got to go back a little bit.

This guy, Ron Stover, who was the buyer I told you about Walmart. Yeah. Very tough to sell products to. I can't be the next doll. He said, no. One day he took me to Walmart right across the street from Walmart headquarters and showed me these 98 feet of Barbie products all in coffin boxes. He says, Isaac, you see these? They do everything for me. They own 90% market share.

They come and set up the planogram. They sell. And I make my bonuses every year. Why would I take a risk and take a portion of that and give it to you? I said, Ron, what if I came up with something that was better than Barbie and you didn't buy it? You're going to feel left out. He said, if and when you do that, I will buy it.

So I said, okay, remember this. I came back and told my design team, give me something that competes with Barbie. And everything they showed me was a Barbie knockoff. So one day, and I used to take my kids to work and my daughter Jasmine, I think at the time was 10 or 11. And this guy comes in, his name is Carter Bryant. And he says, I have the next doll concept.

He showed me these drawings and they look like aliens. They were these like plump-lipped dolls. Yeah, probably big face. Big heads, yeah. Yeah, exactly. So I said, I'm not sure if this is going to work. And I asked my daughter and she says, Dad, they're pretty cool actually. So I asked this guy, okay, how did you come up with this? And he said, he works at Mattel. I said, okay, but where did you make this?

If this belongs to Mattel, I don't want it. And he said, no, I did this in Missouri where I was not working for anybody. I said, okay, you quit tomorrow. You come here and work on this. You're going to give it a chance. He said, I don't want to be an employee.

He said, okay, what do you want? He said, I want to get the royalty. I said, okay, fine. We give you 3% royalty on the dolls, but you must quit Mattel and come here right away. All right. So wait, just to pause for a minute, because I think this has been ruled on in court.

You're saying that Carter Bryant came up with this idea for Bratz on his own during a break, a period of time when he wasn't working for Mattel. Right. But then later, when he approached you at MGA, he was back to working for Mattel again. Right. And did he ever pitch Bratz to Mattel? No, because I said to him, why didn't you show it to Mattel? I said, Mattel will never do a doll that competes with Barbie. Barbie was on the pet stool.

So the biggest mistake he made, Guy, was he decided to be a nice guy and give Mattel two weeks notice.

To finish some of the things that he was working on. Because that two-week period essentially later on would be the basis for a case that Mattel would file. Bring against you. Exactly. We'll get there. But he brings you this. So on the strength of your daughter saying, hey, these are cool because you thought they looked weird. Right. But on the strength of your daughter, you said, okay, let's see if we can maybe do something here. Right. By the way, did he call them brats, Carter? Did he have a name for them or no? Yeah, he called them brats.

Bratz. Bratz with a Z. Yeah. And these dolls were going to be the anti-Barbie in a sense because they were going to have big heads and different sort of street fashion. And they actually looked more ethnically different. Yes. They didn't look like a Northern European white. I mean, there were other, there were non-white Barbies, but basically the archetypal Barbie was... Right, exactly. So we decided to make what we call Bratz Pack. Right.

And I insisted we make all four, four dolls, and sell all four together. In one package? Yeah. No, the retailers had to buy a pack of four. But as an individual, as an individual, you could buy one. You could buy Sasha, you could buy Jade, you could put Yasmin. And what were they? Yasmin was, she was based on your daughter, so she was more sort of Persian looking. Yeah. But you know, what I didn't want to do is bring a stereotype. Yeah.

So like Sasha was supposed to be kind of African-American, but not African-American. Or Jasmine was supposed to have olive skin because she has olive skin, but not Persian. I mean, I remember I went to...

And I asked a whole bunch of kids about Jasmine and they said, oh, she's Brazilian. She's Brazilian. Yeah. So basically we did that on purpose to make sure that it appeals across the world. Mm.

And how long did, so he brings this to you in 2000. Yes. How long did it take to get a physical prototype of a doll that you could show to Walmart? Yeah. So I said, we need to have samples with packaging ready for Hong Kong Toy Show, which was on January 2nd. Yeah. And they said, there is no way you're crazy. Yeah. It's not going to work. I had a head of sales and marketing team.

who worked for me, who used to work at Mattel before. And he told me, anybody who has taken on Barbie...

Has gone out of business and gone bankrupt. Hasbro tried. Don't do that. You're going to go out of business. I said, no, we're going to do this. He quit because he says he doesn't want to have a failure on his resume. Wow. So I take these four samples to Hong Kong. And this is a trade show at Hong Kong. Right, yes. Okay, and this is an important trade show. Very important trade show. Okay. So we show this to Target. They like it. The buyer says, yeah, it's different. We'll buy it.

We showed these to Toys R Us. They said, yes, we will buy it. Bandai in Spain, they liked it and they said, yeah, we will buy it. Comes round the store, again, he says he won't buy it. The Walmart buyer, won't not buy it. Okay. I said, why? And he says, they don't look attractive. So I was so pissed off at the time. I went all the way up to the CEO of Walmart. So he told them, okay, Ron, buy it.

So he says, okay, I will buy it, but I only want Chloe. Only blonde dolls sell. And I said, Ron, you know, my daughter was born in America, but she has darker skin. She doesn't want a blonde doll. She wants a doll that more looks like her. If you want to buy this, you have to buy all four or I won't sell it to you. And

He ended up buying it, but one pack, only one. Can you imagine? You had to look for it in the Sea of Barbie to find it. It was just one sort of like one part of the shelf, a tiny part of the shelf. Yeah, just one box at the bottom left corner, the worst area of the shelf. So that's what happened. And we launched the doll first, believe it or not, in Spain. They were first in the market.

And the product sold out instantly. Instantly. Wow. Toys R Us USA, Debra Trall was the buyer. She gave us an order for $6 million on FOB. Yeah.

And we started advertising. On Nickelodeon and the usual channels? And Fox Kids. Yep. And the doll didn't sell well. The doll didn't sell in the U.S.? At that time, no, it didn't sell well. But it was selling in Spain. Yeah, it was selling in Spain, but it wasn't selling well here.

And the reason was we were not putting enough advertising behind it. But you were advertising on Nickelodeon and Fox Kids. Yeah, but not enough GRP to, you know, instead of spending two, three million dollars, we were spending a million.

And we were not getting enough eyeballs on it. So there wasn't awareness of the dolls. They might have been on the shelves at Target and at Toys R Us. Yes, exactly. But kids were just passing them by. They didn't know what they were. Yeah, exactly. Okay. So comes October of 2001. Toys R Us cancels five and a half or six million dollars worth of Bratz orders. Wow. I thought, now for sure we're going to go crazy.

Out of business. So I went, without my wife's approval, got a second mortgage on our house and put another $1.5 million TV advertising on this doll. Wow. And the sales went through the roof. What was the ad that you did? I wanted to have a live action animation combined with the great music.

because that was going to cut through the clutter on Nickelodeon. It will be different. And now we pumped that TV commercial and it was so catchy. The sales went through the roof.

And Toys R Us came back to us, I think two days before Thanksgiving, said we want to buy it back, that order that we canceled. And I said, those goods I don't have anymore, but I have goods in LA and they cost 25% more.

And they bought it. They bought it and I paid off the mortgage. That is unbelievable. So basically, the dolls were not selling. Toys R Us had canceled their order. Right. Many people would have just kind of said, okay, this is not going to work and let's figure out how to reconstitute the business. But you had probably invested. How much had you invested in Bratz at that point? Oh, my God. I had put everything we had behind it. Like how much do you think? 10, 20, 30 million? More than $15 million. Wow.

More than $15 million. So if that didn't work, I would not be in business right now talking to you. I would have gone bankrupt. You bet the farm on this thing. I bet the farm and my house on it. When we come back in just a moment, how Bratz and Barbie and their parent companies wind up in court in a bitter dispute that lasts for years. 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 Raz. So it's 2003 and Bratz dolls are a huge hit. MGA Entertainment sells a billion dollars worth. And that cuts deeply into Barbie's dominance of the doll market. So the maker of Barbie, Mattel, starts to investigate.

They started to find out about the origins of this product because they had a feeling that maybe it was stolen from them. The IP was stolen from them. Yeah. When you look at the history of Mattel, they have basically used litigation as a business tool to put competitors out of business. And this is, by the way, this is a playbook that many big companies use to try and quash litigation.

But your trajectory was so fast, it must have overwhelmed Mattel. I mean, you got to a billion dollars within a year and a half. And then by the end of 2005, two, two and a half billion dollars of Bratz had been sold. You'd really, it was like, and what was the appeal of these dolls? Why do you think that those dolls just landed with girls? Right.

They struck a chord with the girls because they were, first of all, didn't look blonde anymore.

They had what I call passion for fashion. Their fashions were new. Baggy jeans, baggy cargo pants, sort of the crop tops and things like that. Right. I mean, I guess because Barbie was, you know, sort of the, let's just say the country club doll and Bratz was like, maybe it was perceived to be more rock and roll, maybe. Right. Exactly. So-

When they found out it's not a fad, they tried to knock it off. They basically tried to make a Bratz knockoff. Yes. And they called it Mycene Barbie. Mycene Barbie. Yes. Yes. It didn't work. Then they came up with a line called Flavors. Flavors was like an urban-looking doll with graffiti packaging, et cetera. And I did an interview with the Wall Street Journal. You can pull it up.

And they told me, what do you think about flavors? And I told Wall Street Journal, they look like gangster Barbie. The only thing that's missing is the cocaine vial. And she wrote that in the article. Why did you say that? Why did you not have somebody sitting next to you saying, Isaac, shut up?

Keep your mouth shut. No, I didn't. Okay. All right. So you say that, and I'm assuming that pisses Mattel off. Well, I did more than that besides the cooking. Bob Eckert, who was the CEO of Mattel, came from Kraft Foods. And I also sell making and selling toys and selling cheese are two different things.

And apparently, Bob Eckert said, sue that son of a bitch. I'm not surprised. You pissed them off. I did. Why did you poke that bear? I shouldn't have. So they sued you for what? They didn't sue me first. They sued Carter Bryant first. They sued Carter Bryant, your designer, basically saying, hey, that's our intellectual property. Right. Exactly. And then they leaked that lawsuit to Wall Street Journal. And I am...

Walking into this restaurant, Katana, on Sunset, the Japanese restaurant, my cell phone rings. It's the Wall Street Journal. Hi, Isaac. I want to talk to you about this lawsuit that Mattel just filed. I said, what lawsuit? So this lawsuit they filed against Carter Bryant saying that he worked at Mattel for two weeks while he was working for you on Bratz.

And I called Carter Bryant right there. I said, I was just told about this with Wall Street Journal. Did you work at Mattel two weeks at the same time working on Brasdall? He said, yes. I got so angry. I said, why the hell did you do that? Because now give him a cause to bring this lawsuit.

Anyways, that's how the lawsuit started. And we countersued Mattel for copyright infringement with my scene doll. I see. OK. And we countersued them for theft of trade secret because I thought there's a mole in my company, to be honest with you. I thought Mattel had a mole in my company.

Okay. Here's what I understand. By 2006, Bratz had about 40% of the worldwide toy market in dolls, number two doll in the U.S. market. Now you begin what will be a protracted battle. There have been articles, books. There have been documentaries about this war between Mattel and MGA. They teach that case in universities. I've read some of these case studies.

And I've walked away from this just thinking, oh, my God, all the money that lawyers made from this, because really that's who made the money. Oh, my God. Queen Emanuel, the law firm that represented Mattel, made $450 million. It's unbelievable, right? Okay, so this, now you begin what would be a protracted legal battle. But I think around, at a certain point...

A court basically said you had to stop selling the Bratz dolls. 2008. 2008. Okay. They said you cannot sell Bratz dolls while this litigation is happening. So what did that mean? I mean, this is a billion dollar... Yeah. So they, Mattel, asked for an injunction, worldwide injunction. You got to pull...

All the Bratz toys and products. You had to stop selling Bratz. So the injunction came literally a week before Thanksgiving. Which is like the time you've got to start selling for Christmas. Right. So we went to an appellate lawyer and the appellate lawyer says, we got a file for an emergency appeal.

So we filed our appeal and literally the day before I had to sign the paperwork to do the recall process.

was the hearing on the Ninth Circuit. Can I just mention one thing? Yeah. Part of the ruling by the previous court was also that you had to pay Mattel $100 million in damages. Yeah, that's right. Exactly. And that Mattel would have the rights to the doll. Yeah, they belong. Everything brass belongs to them. I mean, it was totally a draconian. I mean, you guys got absolutely hammered in that. Exactly. Everybody thought we're going to go bankrupt. I thought we're going to go bankrupt. To be honest with you, I became, for the first time in my life, suicidal. Wait, wait, stop. Stop.

That's a serious thing that you just said. I mean, you felt that you were finished. Yes. And that you didn't know if you were going to be able to survive. Exactly. I really felt like that. But Isaac, you're a fighter. You're the guy that set Nintendo and heard no, and you felt like this, really, you were going to be defeated. Yeah, it was, I mean, every ruling was coming against us. Did you, Isaac...

Because I've talked about this on the show before, and certainly times in my life I've been depressed and have had depression and learned to manage it over the course of my life. You don't strike me, and maybe this isn't fair to say, as somebody who dealt with that, but did you or were you? Are you prone to getting depressed? Yes, I have been diagnosed with depression because the way I grew up. I mean, I didn't have a childhood. I worked hard.

since I was eight or nine years old. And I went through a lot of hardship. And yes, I do have depression. And I've tried to manage this with a lot of things. I meditate. I still go to therapy all the time. I'm not ashamed about that. Was it hard for you as a Middle Eastern man coming from a macho culture to acknowledge that?

No, for me it wasn't. I mean, people who know me, they say, oh my God, Isaac, at the drop of anything, he starts crying. So I'm not afraid of being in touch with my own internal emotions. But that time with that injunction, I mean, they took me...

To ER at Cedars-Sinai, it kept me overnight. Because you thought you were having a heart attack? Yes. How did you manage? I mean, this is a long period of time and a long period of time under stress. It was like two years while you were fighting this. Ten years. Well, ten years, but the most, the injunction over the court order. Yeah, that was the hardest part. How did you manage through that? Personally for me, because I don't like to quit. I hate quitting.

I did not want my children to see that, oh my God, our father is defeated. And in the Persian closely knit environment, I don't want people to see that I'm a failure. And there were days that I was so down, but then I would get energized and I said, I'm not doing anything wrong. So I would go back and fight harder. Yeah.

So let me take you back to the timeline for a moment, Isaac. Back to, I think, 2009, when you're finally going to have your appeal hearing on your lawsuit with Mattel. What happened there? So, you know, when we went to that appeal hearing, literally it was the day after was supposed to be the recall. And during the break, I told Josh Rosenkranz, who was our appellate lawyer, I said, Josh,

Go ask the judges for a stay. A stay that would enable you to sell the dolls again. A stay at the injunction, yes. By 4 p.m., I was in the car driving from Pasadena to my office, and Josh called me and says, Isaac, you don't believe it. The Court of Appeal just issued a stay at the injunction.

And it was, oh my God. And boy, I again, as usual, I burst into crying. I screamed. I called my wife, got my whole company people together. And I told them this, we opened the bottle of champagne. And I said, now let's bring Bratz back and kick Mattel's ass.

That was not the end of it because you would go back to court. It's too long and complicated to get into all the details. But eventually you won. Mattel was originally ordered to pay over $300 million in damages. And then it was a long time of fighting against each other. Hundreds of millions of dollars in legal fees, hundreds of millions of dollars in damages and in judgments. But I have to assume that you walked away from all those lawsuits

Like in the red, you didn't make any money from it. You actually lost a lot of money, even though there were judgments in your favor. In the end, you actually lost a lot of money. Yes. I mean, guy for six months, I sat in court. I would not come to my office. I hired a guy named John Barber to run my company while I'm in court. You know, one of the things I remember vividly when the jury verdict came and of course all the press was there in the courthouse, was

And my son Cameron, who at the time was 19 years old, the LA Times reporter started asking him, "How does it make you feel now that your father has won this long battle?" He said to the reporter, "Yes, my father won this case, but Mattel took away our father from us for the past 10 years."

I still have pain about that lawsuit. I still do. You can tell. I mean, you can hear it. Right. But, I mean, it goes back to my childhood. And coming home bloodied and my mother saying that if you ever come back bloodied, I'm going to hit you. Go back and fight. Don't be bullied. I don't like to be bullied. And I think in general, and I tell my kids, if you are right...

and you believe in something that you write, you fight to the end. Yeah. And I will not change that. You know, it's interesting because Mattel had obviously a resurgence last year with Barbie and the Barbie movie, and the Barbie film was so successful, and I imagine it's had an impact on their sales. Yeah.

And clearly, they also have not forgotten because I'm sure you saw or aware of it, but there is a scene in the Barbie movie when Barbie goes to high school and the high school girls are kind of like berating her with this brutal honesty. And they are named after the original Bratz dolls. The mean girls are Yasmin, Sasha, Chloe, and Jade. Exactly. So they're taking a dig at you. Yeah, they were. It was funny. You know what?

It's a good thing they did that because Bratz is on a resurgence and growing again. So on my LinkedIn, I thank them. I thank them for this. All right. So you now – now Bratz is back. But, you know, again, like, you know, these things could be cyclical. And so I have to imagine – because I know that you, in the meantime, were trying to expand. We didn't really get into this. But you actually bought –

another company. Yeah, Pixel Zoo in Australia. And I bought actually, I bought Zap, which is a German company. I bought Little Tykes. Little Tykes, which makes like... Cozy Coop. Right, and toys for little kids. But this was, Bratz was still kind of the center of MGA. And I wonder...

You had to be thinking, like, we can't—this can't be the center of our business forever because it might not be a forever toy. Right. So we came with many, many new toys. Yeah, I want to talk about one of them because this is now a huge seller for you called LOL Surprise. This came out in 2016 and basically—

It's like a doll that you unbox and layers. And anybody who's got kids knows that many kids for a long time have been obsessed with these unboxing videos of other kids just opening things. Tell me about the genesis of LOL Surprise. How did that come about? So, you know, my kids were saying to me, Dad, do you know what unboxing is? People buy Apple iPhones, go in front of the camera,

unbox it, and they get 18 million views. And some of them have YouTube channels like Ryan's World that turn into multi-million dollar businesses. Exactly. Huge. So the next day, I couldn't wait. I came to my office, and I went to my head of design. I said, I want to have the ultimate unboxing toy.

We had something called baby brats. They were so cute. And I said, I want these to be at the center of the ball once people unwrap it. So it's a ball and you would unwrap it and in different layers there'd be a little surprise like stickers or something. But in the middle would be this doll. Right. And it became the

biggest toy ever that we have launched, much bigger than Bratz. It's amazing because there's so many elements of this story that were, like even the name, LOL Surprise, I guess, came from a consultant that you had who said, look, if you do searches in YouTube, you'll see a lot of LOLs or surprise. And so let's just combine them and call them that because it'll show up in search. Exactly. I mean, the reason why I point this out is because

To build something out of nothing oftentimes can be a failure. Right. And you've had, I mean, there have been plenty of, I'm sure, dolls that you've had that just didn't go anywhere. Yeah, like we had a doll line called Novi Stars that everybody in the retail thought is going to be huge. Novi Stars. Right. Okay. And it was based on aliens. Right.

And I thought it was going to be a biggest failure we ever had. But why didn't they work? They are kind of weird and creepy, but why didn't they work? Because I thought as an adult they looked good. Retailers thought they looked good. But then after they failed, we went to research and the kids said they don't like aliens. Period. They get scared of aliens.

So you just don't know if something is going to work, right? You just don't really know. For every success there is, at least in the toy business, success.

15 to 100 failures. I call toy business legalized gambling. Because you have to constantly come up with new innovations because kids are fickle, right? They're into something for a short period of time. Yeah, exactly. The key is to be able to listen to them and translate what they're saying. Yeah. I'm curious today, I mean, it's been reported that the company, you know, at various times does over...

$5, $6 billion in revenue. Yeah, in retail sales, yes. You're not an upstart. I mean, you are as big, if not bigger, than Mattel. We're not as big as Mattel, but we are the number one privately held toy company in North America. So we're big, but I always think like an upstart, and so does my team.

So even though you're still a competitor to Mattel and Hasbro, you still see yourself as an outsider, as like the guy fighting these giants? Absolutely. How long until you, I mean, here you are now, you've become a billionaire in toys. I mean, when do you feel like you don't have to fight anymore?

That's a very, very good question. You know, I told you I go to therapy. And one of the things that my psychologists keep telling me is, Isaac, okay, I know your childhood and you had these issues, tough, hard upbringing. But you're still fighting. You got to change and relax. And unfortunately, I think...

Some ingrained habits is hard to break. And as you get older, it becomes harder. I have tried to get better. I work less. I'm much calmer with my people, with my family, etc. But for good or bad, I still have that fighting instinct in me.

You have obviously, you know, made a lot of money and done very well. It's privately owned. Right. You're 70. You've got a long life to live. But I wonder what you think about the future of MGA. I mean, at what point do you sort of stop going into the office every day and running the operation? I got to tell you, I still enjoy what I'm doing. I love it. I mean, I just came up with five new toy ideas.

I got COVID, so I was home for five days. I came with five new toy ideas, but I left home. Huh. I mean, when you think about the journey you took, you know, from where you came from, coming to the U.S., no connections, very little English, to, you know, building now the largest privately owned toy company in North America, one of the largest in the world, privately owned, and building

becoming hugely financially successful. How much of that do you attribute to the hard work you put in and how much do you think has to do with the luck, the fortune that you've met? I don't believe in luck and I never put my hand in front of anybody for a dollar. So it is the hunger. You need to the pride of winning and succeeding. And I have lived the American dream of

That's Isaac Larian, founder and CEO of MGA Entertainment. By the way, Isaac's planning to keep

keep the business in the family. He's training his son Jason and his daughter Jasmine to take over MGA once he retires. Jasmine's already built a successful brand of her own. It's a fashion label called Cult Gaia. And random bit of trivia, the co-founder of Sweetgreen, Jonathan Neiman, is Isaac's nephew. And if you scroll back in our podcast queue to 2020, you can hear the story of how they built Sweetgreen.

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 free.

This episode was produced by Alex Chung with music composed by Ramtin Arablui. It was edited by Neva Grant with research assistance and fact-checking from Carla Estevez and Cecile Davis-Vasquez. Our engineers were Gilly Moon and Robert Rodriguez. Our production staff also includes J.C. Howard, Casey Herman, Sam Paulson, Carrie Thompson, John Isabella, Chris Messini, Catherine Seifer, and Malia Agudelo.

I'm Guy Raz, and you've been listening to How I Built This. If you like How I Built This, you can listen early and ad-free right now by joining Wondery Plus in the Wondery app or on Apple Podcasts. Prime members can listen ad-free on Amazon Music. Before you go, tell us about yourself by filling out a short survey at wondery.com slash survey.

From Picasso to Cleopatra, the podcast Legacy looks at the lives of some of the most famous people to have ever lived and asks if they have the reputation they deserve.

In this season, they take a closer look at J. Edgar Hoover. He was the director of the FBI for half a century. An immensely powerful political figure, he was said to know everything about everyone. He held the ear of eight presidents and terrified them all. When asked why he didn't fire Hoover, JFK replied, you don't fire God.

From chasing gangsters to pursuing communists to relentlessly persecuting Dr. Martin Luther King and civil rights activists, Hoover's dirty tricks and tactics have been endlessly echoed in the years since his death. And his political playbook still shapes American politics today. Follow Legacy Now wherever you listen to podcasts. You can discover more to the story with Wondery's other top history podcasts, including American Scandal, Black History for Real, and even The Royals.