Strauss Zelnick - Playing to Your Strengths - [Invest Like the Best, EP.347]

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0:25 Operate smarter and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgeline.ai. Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolosis.com.

1:00 Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast. My guest this week is Strauss Zelmick, the CEO of leading game publisher Take Two Interactive.

1:38 Maybe most well known for its hugely successful Grand Theft Auto game. Take two is a sophisticated top tier developer, publisher, and marketer of interactive entertainment that owns Rockstar Games and 2K. Strauss's passion for entertainment led him strong and fast into the industry as he worked his way from sales to CEO and transitioned from motion pictures to gaming. Today we cover his approach to staying on the cutting edge of media development, unlocking talent and potential in those around you, and becoming the leader you are meant to be.

2:06 His intensity and his standard for excellence comes through clearly. Please enjoy my conversation with Strauss Zelmick. So Strauss, it's hard to know where to begin this conversation because as I was thinking about it, I think you share more specific interests with me than just about any guest I've had, those being technology, investing, media, health. It's hard to pick a starting point. But media certainly has been a through line of your life and career. And I'd love to begin by just understanding why. What is it about?

2:33 the various forms of media and you've had your hand in all aspects of media's history as an investor and operator. Why does that Sector keep drawing your attention and curiosity through time. I don't know, I might have an attachment to Consistency that's greater than many people. I was always interested

2:52 And everything creative. And I wanted like many people who work in media and communications and entertainment, I wanted to be A creator, an entertainer, first and foremost. I don't really want to be an actor, although I actually did dabble in that when I was a kid.

3:08 Then I wanted to be a singer songwriter. Then I wanted to be a writer. And then I realized I probably shouldn't be any of those things, but I was still really interested in in the creative arts and in creative businesses. And that led me into entertainment initially And

3:26 It spoke to me. I do enjoy business. Just as business. I think I'm better like many people when I'm passionate about the thing that I'm working on. And I'm really passionate about

3:38 Entertainment. More recently, but still quite a long time ago, technology. Then that was more sort of a weird twist on my career, which is a story I can tell you. But initially I like many people, I wanted to be an entertainer. And a creator and then

3:52 Realize that. I didn't have any talent to speak of. in the spirit of that twist, I'm curious how you would define the eras of the media business. Across your career.

4:03 They're most important. I'm guessing that the internet and everything that it brought on media as a key thing, but what are the key inflection points as you think back across the whole history? I intentionally created most of those inflection points for myself. I initially wanted to run a movie studio. But people weren't exactly lining up to hire me to run a movie studio, so I got the only and best job I could get. in entertainment when I graduated.

4:25 From school, which was to work in sales at Columbia Pictures television. And I went there as opposed to a consultancy or an investment bank, which were where the other offers came from. Because even though it wasn't overseeing the production of motion pictures, it was certainly closer than working on Wall Street.

4:44 And the first inflection point was I did well in selling television programming. I learned how to sell. And I was recruited to go to another company in the entertainment business. that was growing rapidly and was interested in my becoming a senior executive there. So that was the first inflection point That took me from television.

5:05 Into home entertainment. And then the that company started a movie studio and I was responsible for that. So that took me to motion pictures and lo and behold I was running my first Motion Picture Studio. Then I was recruited to Run twentieth century Fox.

5:20 which included motion picture production and distribution and some television and home entertainment worldwide home entertainment distribution. So at that point I was broadening My remat. Both in terms of production and distribution. So it sort of happened partially because of what I wanted partially

5:38 because of serendipity, partially because of opportunity. And the story about technology So I'm at Columbia Pictures. And this is a really long time ago and New media was just coming along, no new media in those days. because we're talking about nineteen eighty three to be exact, was believe it or not, pay television and video cassette distribution.

5:59 The dawn of the age of h home entertainment. And it wasn't the dawn of pay television, but it was early for pay television. So those days the biggest part of the entertainment business, the sexiest part was motion picture production. Everything else was Answerary.

6:13 And anything that was new media was really anciller. So all the big traditional studios would look around And they would choose their least important executive to oversee new media. And that was me at Columbia Pictures. They gave me a great gift. I was responsible for pay television and home entertainment at Columbia Pictures.

6:33 Which were these tiny little businesses. And I realized intuitively that the future was new media. And it was known as new media then. And I became

6:44 expert in those, even though they were very small businesses. By becoming expert in those, first of all as those businesses actually grew rapidly, I had the opportunity to manage them first at Vestron, which was the company I went to after Columbia Pictures, which was at the time the leading independent distributor of home entertainment.

7:02 and became the leading independent motion picture company for A short period of time. And that also brought me more responsibilities of Fox, where all the new media stuff also reported to me. So when an opportunity came along years later

7:16 to join a pre revenue video game company. I was already steeped in all things New media related. And I had religion on video games. Certainly not for everyone, but for many people who were working in Hollywood. One of the interesting themes that I became obsessed with in media I got from Peter Thernen, actually, I don't know how much you overlapped with him at twenty central. We were colleagues for years and then I worked for him for the last six months that I was at Fox.

7:39 I love his beautiful idea of content to commerce, this investing concept that he's based the Trinity Group on. And as I've studied the modern media landscape, it seems like so many of the best business stories are some form of content tied to some adjacent business model that isn't necessarily just straight line paying for content. I'm curious how you think about that. Trend.

8:01 In the internet era, maybe outside of it. Video games seems like a special case because everyone is willing to pay sixty bucks or a hundred bucks for Grand Theft Auto. But it seems like other straight line content businesses, maybe Netflix As the exception. Have struggled. It's just like a really hard business model. Do you agree with that? What do you think about just pure

8:19 content. as businesses today in this era. If the content is valuable enough to consumers, they will generally pay for it. But even in video games, half of our business is mobile, mobile's free to play. And people are not paying for that.

8:33 Initially. They wanna install the game for free, be able to play the game for free, and then Some portion of the audience, less than twenty percent, may be willing to pay to upgrade the experience. And it's generally not twenty percent. So there are numerous examples in the history of entertainment where

8:51 The content. was not valuable enough to the consumer to be paid for, but valuable enough to be consumed. That's why we have advertising businesses. Do you think that anything is fundamentally different? About that equation today than

9:03 early in your career. Not really. Everything's Different in the expression. But the underlying concept is the same. So

9:12 Even in the beginning of my career there were advertiser supported businesses that brought people audio visual content. Free over there television. When you think about what it takes to be successful in the media business. when you're not the creator of the thing. So when you're not the director, the

9:29 game creator or whatever. What lessons could you draw from your experience working with so many different media businesses? What does it take to do well? as a media business operator. Well all depends on the job that you're in. For many people, for many operators you have to

9:42 actually be good at creating things, even if you're not The actual creator, you're the producer. So you pull together all the creators and all the elements and perhaps the marketing and you make things happen with regard to the product. itself, that's not really what I do, because I became a chief executive really early in my career, serendipitously and oddly and Without regard.

10:03 For the fact that I No experience and didn't deserve the job. I just got lucky. I sort of skipped over a lot of that and went right to running businesses. Running a business is different, obviously. There are numerous jobs in entertainment.

10:16 That are important. for the mission of the entertainment company. That have nothing to do with creating the entertainment itself. The most important jobs, of course, are the ones that create the entertainment. Those are the only people who really matter in the entertainment business, so they're people who create the head. You remind me of my favorite part of my conversation in this format with Peter, which was

10:35 Talking about working with James Cameron on a couple of those huge films. And then one of the questions was what is the best way to work with talents like that? And maybe Rockstar is a great example of. Obviously the biggest game. out there people building this brilliant thing as creatives. And the lessons you've learned about working with those people.

10:52 to protect them in such a way that they can do their thing. And also manage the business on the other hand. Seems like those two skills sit next to each other. Peter had all sorts of interesting thoughts about that. And I would love to hear your take on working with all sorts of creatives and How to do that well. So first one size does not fit all. My

11:11 approach and style is And different than many other people who've had great success. So People like Jeffrey Katzenberg, for example, I think the way he's succeeded in doing that is that he's

11:26 intimately engaged with the creative process, he's intimately engaged with the creative ideas. He's intimately engaged with story. And I am not. Because I don't have those skills. And so the way I engage with talent is different because it's a reflection of

11:41 who I really am and what value I can legitimately bring to bear and the talent that I choose to work with. Jim Cameron's a great example for me because He was not interested in my creative point of view. And I knew enough about myself to know that I couldn't add any value. It's not like Jim Cameron needed my help. Thank you very much. So what he really needed was

12:02 Support. and empathy and Kindness. and enthusiasm and encouragement. And he occasionally needed help navigating the waters when there were budgetary concerns or timing concerns.

12:16 I think Probably the thing that I invest on. I'm not sure it's a skill. But it served me well is that I seem to have an ability to identify genuine talent in other people, whether that's creative talent or executive talent. I seem to be able to tell the difference between the real deal and not the real deal.

12:33 And I also seem to have some ability. To Engage people in a common mission. To encourage

12:44 the highest degree of quality and performance. And to create enthusiasm for a shared Vision. And then I'm good at getting out of the way. I don't have any fantasy about my own

12:55 Talents. And I'm okay with that. And There are a couple areas where I think I have some expertise and I'm fine sharing those.

13:03 Identifying the top talent. And persuading them to work within your organization. And then Encouraging them

13:12 to seek perfection and pursue their passions. is actually an unusual set of skills in the entertainment business. And a willingness to put one's own ego to the side. Not too many people. Are willing to say as I will.

13:25 I didn't have anything to do with that hit. And I say that because it's true. I'm really lucky. I've run every kind of entertainment. organization that there is.

13:34 And During my tenure. One hundred percent of the time. Our team has had the highest hit ratio in the business. And this is reasonably well known.

13:44 And the reason I'm comfortable saying those words first is because they're true, but secondly is because and I didn't have anything to do with their creation. Nothing whatsoever. I did have something to do with creating an environment that made that possible. And I mentioned the the selection of talent and the engagement with talent. And I think the other piece is And I don't think this is like any terrific or rare skill

14:04 But I'm gonna running a rational organization that's appropriate. Highly compliant, efficient. Organized. sound at making decisions. And calm and well financed.

14:16 So I'm able to say to a creator, look, this is a safe place to work. No one's gonna raise their voice. No one's gonna let their ego interfere with what you do, myself included. No one's in to take credit for what you do, myself included. We're not gonna do anything crazy on your watch, we're not gonna go bankrupt. You're not gonna be fighting off silly announcements, and I'm not gonna be on page six. None of that's gonna happen here. Oh, and by the way, we'll be kind to you. And if you have issues, whether they're business or personal,

14:43 I actually am here to help and I genuinely care about you as a person. Genuinely And you'll be the star, sounds like And the creators creators will be the star. I'm not even in the back seat. I'm in the caboose. And that also is consistent with my personality. I don't want to get credit for something I didn't do.

15:01 That's not who I am. I guess I wouldn't mind credit for something I did do. But I really don't want credit for something I didn't do. Do you have a favorite example thinking back on the various episodes of talent spotting that you think is the most emblematic of this kind of whole arc of seeing something early and then creating that space for the creator to do their thing. I wish I could say his talent spotting because that would be better for my career if I could tell. Wow, I was just walking down the street. There was Sam Hauser and I was like, Sam, you should be in the video game business. So it doesn't work that way. I think

15:29 I've been fortunate enough that People were either in organizations that I took over or or people were introduced or people already working. In an adjacent area. This is not like me spotting some unknown talent saying You should be a star.

15:44 Puts. Crazy anyhow. The people I work with who are fully established people with Strong backgrounds. Pay their dues elsewhere in most instances.

15:53 But what I did do is give them a reason to work within the enterprise that I was part of when they might not otherwise have done that. For example. I'll tell the story even though it's a bit out of school.

16:04 So Greg Thomas runs visual concepts. Which is the company inside two K, which is a division of take two. That makes our sports games. And self serving, but I believe it's true. Visual concepts makes the very best sports games on the planet, and Greg leads that team.

16:19 And Fake two is a very troubled company when my team took over in O seven. And I went out To visit with Greg. who worked in Northern California.

16:29 Because he was one of the most important people of the company, even though our sports business was tiny in those days. And I remember sitting in my temporate office out there and Greg.

16:38 Who is an adult. And self confident and Real smart.

16:44 I've heard you're a decent guy and I imagine you have some interesting plans for trying to make this a better company, but I've had it. I want you to know I'm leaving. And there's nothing you can say. Please don't even try. It would embarrass both of us. I've just got to move on. I cannot do it here anymore. And I said I hear you, I understand, I know exactly what you're saying. I'm gonna ask you to do something for me. And he said, What's that? I said, I'd like you to give me three months. Just give me three months. And if at the end of three months you feel like it's a lost cause, you can go with my blessing.

17:13 But in three months I'd like to be able to show you that this is a kind of organization that you could be happy working in. And he thought about it, he really didn't want to say yes. And Greg could work anywhere. And could have at the time. And he said

17:25 'Cause he's a good guy. He said Okay, I'll give you three months. And Greg is still running Visual Concepts today, seventeen years later, MBA two K is the number one basketball title and he has numerous other titles. Like WWE two K. PGA Tor, two K, many other titles. Been hugely successful and continue to be successful in sports.

17:45 There was something about the nature of that engagement. At that time that caused Correct stop and give me another chance. I do think had I come in and said I Strauss am like really great at this stuff and

17:58 I know everything. I have some wonderful ideas for your basketball game and Here's a magazine that I was on the cover of and here's where I went to school. Had I handled it that way, which s is some people's style, but not mine. He would have left. Or had I said Incidentally, I want to let you know that I think your strategy or your execution or whatever is lousy and I'm gonna give you some ideas to fix it. I have learned and I learned the hard way. Two.

18:22 break no glass initially and to listen first and Er on the side of treating people with great respect. What was the hard way that you learned? So I had this pretty quick progression. I was at Columbia Pictures for two years and I got promoted to become the youngest VP of Columbia Pictures. I got Recruited to Vestron and within nine months became the president to Vestron, which was already the largest independent

18:44 And then It was only three years after that. when I was recruited to become president and chief operating officer of twentieth century Fox and I was thirty two years old. And I thought I had pretty well figured this business out. But I completely missed that. Being

19:01 president of a large independent in those days. was utterly meaningless to the major motion picture business. Was lost on me that I had no real relationships in Hollywood because I had worked on the east coast. That's where Vestron was headquartered. I didn't realise'cause I wasn't self aware enough at the time. I came in with no credibility and I thought that

19:19 The business card. The title in the office was the credibility I needed to succeed. And Fox was a turnaround. It was in the last place at the box office. had a bloated operation and its international operations were no good. And Rupert Marack and Barry Diller were dead set on turning it around, which is why they brought me in. They did not bring me in as a caretaker. I had had a big brief of stuff I needed to get done. I just went in assuming

19:42 I know what to do. Which I did. And other people Will rely on me to do it. Which was not true. Barry and Rupert were relying on me to do'em, no one else was.

19:52 Not having relationships or not being known or getting to know people was even relevant. I just thought Hey guys, this is business. We're here to do business. So I showed up, despite the fact that this is Century City in August, wearing my Brooks Brothers suit. I'm not kidding, and polish shoes. This is long ago, so I was wearing suspenders and uh necktie and To say that I didn't read the room implies that I bothered to look around the room. I thought no, that's irrelevant. I went in all guns blazing. I was gonna change everything all at once. And you know, the thing is I was right about a lot of it. I was right about

20:24 Almost all of it. But it was irrelevant. Because my tone and approach was completely wrong. Years later, I had a business coach named Gloria Henn, who's retired now. She's phenomenal business coach. And she said to me You're really good with the words, you're not always so good with the music.

20:39 So I showed up with the song sheet, but I forgot about the music. I just had the words. And I was really ineffectual because the entire organization just seized up against me, even though I was the president. And I nearly failed. I nearly got to a point where I was so incapable of getting anything done. That the fact that I was right and I had all the right ideas didn't matter.

20:59 Maybe I'd love to zoom forward with that. I'd love the words music concept and apply that to those first three months after you had the conversation with Greg. The good news is for me is that I'm very self critical and I don't mind criticism, and I really did want to succeed and I needed to succeed. And the other news is I don't default to being defensive. And I tend to err on the side of taking responsibility. Basically, when I realised what I had done wrong.

21:24 Took a beat. I actually sat In Barry Diller's office. I sent him I made a horrible mistake about how I approach this. I didn't bother talking about all the things that he or others could have done to support me or help me,'cause what's the point?

21:38 I took responsibility for the mistakes I made. And Got a chance to do a reset. And I did do a reset. That led to great success. These stories don't have all happy endings.

21:48 I was burdened. the whole time I was at Fox with how I chose to enter. And I had to work long and hard to Change the reputation that I built and how to learn an Different way of approaching things. The good news is I wanted to do that and that was okay.

22:03 I also read a book. At the time. Any time I'm asked about this, I talk about it. And I've always been a big reader. Remember in those days there was no Internet, never mind. Wi Fi on airplanes, and I flew all the time back and forth wherever I was going, so

22:16 On those days you read on planes. Yeah, I liked reading. I was heading actually back to New York, I remember And this was right about the time that I had this crisis where it was clear gonna figure it out where I was gonna fail at Fox.

22:27 And so I was in the bookstore at the airport. Remember when airports had bookstores? Looking for a book to read and I couldn't see anything to read. So I'm I like scanning the shelves and I see How to Win Friends and Influence People by Dale Carnegie and I thought, I've heard that. That sounds so goofy. And lame. But I don't know, maybe I'll just pick it up.

22:44 I read the book It is in fact the best. book on salesmanship. and leadership ever written. Yeah.

22:52 I just swallowed the book. Hook, line, and sinker. And it changed my life. Which principles from the book were most Impactful.

23:00 I'll save you the trouble of reading it, although you should read it if you haven't. Anyone should who's in business or in sales. But the principle really is Take a sincere interest in other people. With emphasis on the word sincere. Sto thinking about yourself, think about others, put yourself in others' shoes first and foremost, if you want to get along in the world. Draw other people out.

23:23 care about other people, serve other people. So the title of the book really is against it,'cause the title sounds like How to Be the Most Popular Boy in the Class. Right? It's not very compelling. But the content of the book really is how to sell and how to lead. Um

23:37 Those principles are principles I try to follow to this day. And I did spend a lot of time in sales and I still do. We raise funds, for example, at DMC, I have to sell. And how do you engage people in a selling environment? You try to meet their needs. How do you know what their needs are? You ask them. You listen. You don't try to sell against them. You don't try to convince them to have other needs. You try to meet their needs. And it's true in leadership as well. And that took me to complete the diatribe. for which I apologize, took me to

24:07 Working with creative talent. Because ultimately You're leading a particular kind of person. To try to create hits. And to do that, you have to be of service to that person, and you have to be of service to that person in the way that they need to be served.

24:23 So that they can bring their genius. to the table. Just one more question on the Fox episode. So whose shoes did you most need to be in to fix that problem and play the right music and get through that? Bad first impression. Everyone's.

24:38 There's no one I don't care about. I care about everyone. Well I'd love to zoom forward and hear the investing story in two thousand seven to the beginning of your engagement with Take Two. You said earlier it was a broken business at that time. So in what ways Was it broken and why with your investor hat on? Was it an appealing project?

24:57 to work on before we get to actually what you've done there. Let's see, the chairman had been indicted. The CFO was under criminal investigation. The company was under criminal investigation. The company was also under investigation. by the IRS The SEC and the New York TA's office.

25:15 Company had fired its auditors, failed to file financial statements. canceled its annual meeting. Yeah. had one product than Bain Bunny, the Grand Theft Auto franchise. Everything else lost money. It had revenues

25:30 the year that we took over of around seven hundred million in its core business. There was a ancillary business we sold It was losing, I wanna say around a hundred million dollars a year on that. It had fift million dollars in cash. It didn't have any debt, which was a good thing. And it was probably six months away from bankruptcy. Apart from that, it was in great shape. What was appealing was

25:49 It was in the interactive entertainment business, a business I knew well. because I'd gone to Crystal Dynamics as the pre revenue CEO and that company had been successful and I'd started B M G interactive in that company. Had ultimately been sold to take two, so I knew that business at least, and I understood the dynamics of the business. And I had a pretty good sense that interactive entertainment was well positioned for growth.

26:11 Moreover, I had a sense that not only did this company own the Crab Theft Auto franchise, which was huge, and I felt could be more huge and I knew they had an iteration in the works. That would generate a lot of revenue and cash. But I also to sense I'm some other things that were going on that probably could be improved. For example, basketball, their sports business. And the business itself, the industry was dynamic enough.

26:33 That I was pretty sure we could create other intellectual properties. That would be successful. There were things I didn't like too. At that time the interactive entertainment business was still highly cyclical. driven by the hardware replacement.

26:46 Oh sure, console cycles and everything, yeah. And I didn't like that part of it. It was still A seasonal business was primarily a holiday business. It had a lot in common with the toy business, which wasn't great. And there were still economic order quantity issues around some of the business, less so than previously in the old days when it was a cartridge business, that was a real problem.

27:08 So it wasn't like everything was great. And The other thing I found compelling is I like doing turnarounds. Um When a company is out troubled, it's not like you think you can make it worse.

27:18 In other words, I was pretty sure that whatever I did, it couldn't be worse. Anything was gonna be up from there. That's what led us to take two and oh seven. And maybe you talk about the deal itself. It sounds to be very much like a mismanaged gem. There is this sort of diamond in the center of this big rough, all the issues that you laid out when you were approaching a situation like that with your investor hat on. How did you think about pricing and deal structure and the role and all those things? We didn't really have to because The reason that you'll

27:44 Well. compelling to us was it had a plain vanilla Delaware Unamended charter. Which Enabled

27:52 One, two, show up at the annual shareholders' meeting and take a floor vote and in the event the floor vote went in your direction you could fire the entire board and the management team and take over the company. And That Obviously usually isn't an option, but the company had

28:08 And so poorly managed, that the stock had fallen into the hands of professional investors and hedge funds. who were desperate for new leadership, and under SEC rules we were allowed to go solicit up to ten holders and We did and we spoke to ten holders and asked them to

28:24 vote for us at the annual meeting and We got eighty eight percent of the vote. That's never happened before since so we didn't have to price a deal'cause we didn't write a check. We had to pay our legal fees. And had we not gotten the company, we would have eaten those legal fees. But we didn't actually own a share of stock. We couldn't because had we owned stock, we would have been running the risk of creating a group when we spoke to other shareholders. We don't want to do that, so

28:46 We didn't create a group until about three weeks before the annual meeting. And the group was only Held together for About a month. As I said, we went with eighty eight percent of the vote. And talk about the decision to

28:58 slightly take your investor hat off and become Chairman and CEO slowly over time. There's a lot of really interesting stories like this where investors become involved with the business and then Ultimately end up. operating them. So very famous ones, of course. But what was your thinking, what influenced the decision in the transition from one to the other?

29:15 Remember, I've been an operator my whole career. So I wasn't a professional investor who became an operator. I was a Professional operator who became an investor. And When we started Z M C the idea was that we would invest and operate. Had been CO of the first company, we bought it.

29:31 At Z M C, which was Columbia Music of Japan. And I was executive chairman of other businesses inside. ZMC So it wasn't that much of a stretch. My

29:41 then partner and co founder of Z M C Ben Fetter was the CEO of take two. I was the executive chairman, but I was not the CEO and I was not planning to become the CEO. And I only became the CEO four years later in two thousand eleven when Ben decided to take a leave of absence. For personal reasons. for a year and I at that point had to step in as CEO. Now I want to go back to that three month chunk.

30:04 after your conversation with Greg. So what happened in those three months that Meet Greg. check in and decide to stay on for seventeen more years. Probably have to ask Greg. He didn't even remember the conversation the last time I mentioned it to him. I promise it did happen. We went in and we started doing rational things. So

30:20 We settled with whatever authorities we could settle with. In other instances the settlements took longer And we just started making sound decisions. And The prior management had made so many poor decisions that the difference was really night and day.

30:35 And we were tested by the people who were at Tay Two. We took over on a Friday morning and Friday night at ten o'clock, there was a huge crisis at one of the labels. And I had to step in and solve that problem over the weekend. I think that crisis was

30:51 largely manufactured to test whether I could. And I did. What had happened was one of our labels had interesting intellectual property. That The Hollywood studio was about to infringe upon

31:03 Basically try to steal. And The company that was trying to steal it in Hollywood were populated by old friends of mine. And I called up and said, You gotta stand down.

31:12 It's a fun story. I'm not gonna tell you the name of the intellectual property, but They were gonna infringe and make a movie and steal it and let us go. Fight'em. We can't protect titles. in Hollywood. Titles are not protectable.

31:24 So they basically took the position you can't protect the title, so we're gonna make a movie based on this. I P Which was the legacy. video game IP because Take Two owned a lot of legacy video game IP. Historically what Take Two did in those situations, they immediately filed lawsuits, say lawsuits galore. I don't do that. Take two is now a twenty seven, twenty eight billion dollar enterprise. We literally have two lawsuits pending and they're with patent trolls.

31:46 I don't have a choice. So that's not how I operate. If I'm wrong I settle. If I'm not wrong, I never settle. Generally that keeps you from having to pursue much litigation, especially because we're not wrong most of the time. People know that if I'm not wrong and you want to sue us.

31:58 You'll be in court endlessly. I will use every resource I have, including Not economically. Because if I'm not wrong I'm not settling. And once you make it clear that if you're not wrong or not settling, people don't bother you.

32:09 Spurries lawsuits go away. At that time they had zillions of lawsuits'cause that's not how they operated. So the team had actually called me at ten o'clock in front of it and saying, This is going on in Hollywood, someone's gonna steal this intellectual property. So we're gonna file a lawsuit. I was like, Wow, oh no, we're not doing that. That makes sense. Let me see if I can get them to stand down. So I called my friend who was at the studio and said, This is a bad idea. You really shouldn't do this. And they were like, Uh we can do it and we're gonna do it. I said I'm really asking you not to do it. And I said, Well that's very nice, but sorry, we're gonna do it And I said

32:39 I said, Why don't you go think about it?'Cause it's a mistake. I went to law school, so I actually know something about copyright and trademark clays, it turns out oddly. And I'm not gonna bore you with all the intricacies of law, but the bottom line is you can use any title you want, but if you use the underlying intellectual property, that's a violation. And it's hard to take a title of something and make something that's basically derivative and then claim it's not derivative. That's quite difficult to do. This studio was doing it because Take Two was a laughing stock. To the extent anyone cared about Take Two, it was a laughing stock in the business. This was the game that couldn't shoot straight and they didn't think anyone serious would do anything about it. So they got a call from me. They at that point knew like someone serious was in charge, at least. But then I call back the next day. And I said, Listen, I I'm really suggesting you don't do this. And they said, Well, are you planning to sue us if we do? I said, Actually, no. Here's what I am gonna do though, just so you understand.

33:26 I'm gonna let you go ahead and invest. Seventy five million dollars in the movie. That you want to make on this. And about two weeks before you release the movie I'm gonna go to court and based on your infringement of the underlying intellectual property, I'm going to get an injunction and you won't be able to release it. That's actually what I'm gonna do. Now the people who were hearing this call had seen me in action before. They knew what I did and didn't do. They knew I don't threaten people, they knew I actually do know something about intellectual property law, and they knew that's exactly what I would do.

33:53 When I said it. And they knew that there was a really significant risk that we would win that injunction, and they stood down. So that was on Sunday. So on Monday morning I was able to say to the label in question, We got that problem solved. Problem solved without litigation. Without litigation, without any money spent, without any And the word sort of got around. Oh, this guy maybe isn't a complete idiot.

34:15 Exactly the opposite of what I did at Fox. I didn't go in with let me fix these ten thousand things. I went in and said, How can I help you? They had a problem. I solved the problem. And we did a bunch of that. We did a bunch of problem solving. And we didn't do things that would annoy people unnecessarily. We had to reduce the cost profile of the company. I've done that many times. Most people when they reduce cost profiles of companies and they take them over, what's the first thing that they do?

34:40 Just cut people. Yeah, they fire people. First thing they do. That's the last thing we do. You know what the first thing we do is we get a list of the top ten vendors to the company. 'Cause all companies have vendors who supply goods and services to them. We get the list of the top ten. And then we go to the top 10 vendors and we renegotiate their contracts 100% of the time. We can usually save a material amount of money doing that. We go back to the team and are like, look, we just saved fifteen million bucks a year. Just by

35:05 Renegotiating contract. And people are like wow that's Pretty impressive. Oh, and by the way, we didn't fire assault. And then we're like Let's go a little deeper internally and see what other efficiencies we can find. And then we find another whatever, five or ten million dollars. In the case of a company the size of take two.

35:19 And we do that for a couple of months and only after we've searched in every corner for every efficiency We can find it Do we actually have to do the inevitable headcount reduction? Which we do once. We're honest about it. And then we move on.

35:33 By the time we got to the headcount reduction Most of the people at the company were like looking around saying I can't believe you didn't fire that goofball yet. These are obviously a company that's failing. Does not have a first class staff.

35:44 And we were there long enough to know who was good and who wasn't as good. By the time we're actually doing the headcount reduction, people are like, Thank God, you're letting that person go. They shouldn't have been here anyway. And they're not looking over their shoulders, wondering if their job is next, because we tell them, Look, we know enough to know we're like one and done. That's just typically how we go about cost reduction. We cut forty million dollars out of the annual expenses of the company in six months. I don't think we'd completed that in three months, but in six months we had. So it became clear to the Gregs of the world, there weren't many of them at take two, that Okay, they're not dumb.

36:14 They're not terrible people, and they seem to be making pretty sound decisions. I don't think they said. Oh my God. This is the A Team and I'm so glad. Wow, I just love Stress. I can't wait to have a cocktail with him and It was none of that.

36:27 Okay, on balance these guys are not so terrible and they're making reasonably intelligent decisions. I think that's probably what people said. Do you think that most businesses, if you went through this same exercise of calling vendors and just looking for low hanging fruit? could materially reduce it seems just like a feature of businesses that this inertia builds up and I'm curious if that's true and if so, why? It wouldn't be all businesses, but remember we're talking about a failing business. A successful business? No, in the ordinary course, they're doing this. We're actually at Z M C we just walked away from a deal because the company was

37:00 pristinely managed and we didn't think there was much we could do to improve matters and was fulced. It was hard to m create a return. We see companies all the time where They're well run and that includes their vendor management programs. And no, if I said to you, Yeah, just give me any company and I'll fix it, that would be the height of arrogance. Actually I think it's harder and harder to find turnarounds.

37:19 In a market like the US because Private equity actually is a asset class. has injected a lot of efficiency and a lot of best practices into enterprise. And

37:30 In the nineteen sixties you could find incredibly sloppy businesses. with very sloppy business practices. You don't really see that anymore. When I started my career you would still see companies where they own

37:43 assets that were off topic and their balance sheets were screwed up and Some simple choices. would clean things up. I looked at a company I actually can say the name of the company. When I was at Vestron actually the My boss Austin First.

37:57 was a wealthy individual and he was interested in perhaps Doing some private equity. We wouldn't call it that in those days. And so my corporate development team, John Eastburn and David Friedenson. found a really interesting asset, which was Dunkin' Donuts. It was a public company But it was still controlled by the founding family up in Massachusetts. And it was

38:14 Ridiculously successful and The family had gotten very Undisciplined. I should say about how they spent their money. And so they had

38:23 Resorts. Planes. Huge. asset creep and it was very lumbering and inefficient. It was a screaming bargain. The market cap of the company was like three hundred fifty million dollars. And it was clear to us that you could like triple the EBITDA. Essentially overnight and we tried to take it

38:40 private, we failed because we just weren't experienced enough to pull it off. But we did put it in place, someone else bought it, and that's exactly what happened. And within a couple of years it was worth three billion dollars. You don't see deals like that anymore. They just don't exist. They've been driven out of the marketplace. It's fascinating to think back on my quantitative days. One of the hardest to explain empirical phenomenon was that companies that had the largest percentage growth of their assets. were the worst performing companies in the market. And those with the greatest reduction in their assets were the best performing. And that was independent of all the other things that worked in quantitative investing. And it just goes to show like this asset creep thing, maybe it's less true today because of private equity is

39:17 I think it is less true. I think you don't tend to see really messed up companies anymore. We do now and then. And we still We're happy to take those companies on, but it's relatively unusual compared to some of the stuff we saw at the beginning of Z M C. Coming back to the video game business, I remember a conversation I had with one of the best video game investors ever, Mitch Schlaske from Benchmark. And he talked about this notion of it being this hit driven

39:41 business but that in fact When you really studied it, it was now dominated by what he called forever games. Games like IP and games, which just lasted a really long time. And the franchises that drive, take twos, enterprise value for sure are fall in that category. These games have been around forever. And certainly it's hits driven in the sense that GTA matters greatly to your business, but I'm curious what it's like.

40:03 running a business with such a key set of franchises underneath it. What is the tension between embracing the concentration of the portfolio, so to speak. And a desire or a want to diversify. How do you think about

40:17 which strategy is better. What are the pros and cons of that spectrum? We think you need to do both. If you only focus on your winners Unfortunately, they are not forever. All hits eventually do degrade.

40:32 All being a bit of an overstatement. I don't think Grand Theft Auto is ever gonna go away, and I don't think James Bond has ever gone away, as long as they're treated well. But pretty much everything else has a decay curve. And so if you only bet on your winners in perpetuity, you run the risk of Burning the furniture.

40:49 To keep warm. And That's a mistake'cause then you've nowhere to sit and eventually you're burning the siding of the house. We always invest in new intellectual property, and that's why today I think we have sixteen franchises at take two that have each sold at least five million units in an individual release.

41:05 Then that's up from one when we took the company over in oh seven. The riskiest part of the business. It's costly when you get it wrong. And it's tempting for a management team not to do it because You could take the position that

41:19 It's not gonna matter on my watch. Now I expect to live forever and I like what I do, so Not expected on my watch, does not a good rubric for me. I've been at this for seventeen years and I wanna keep doing it forever. But also even if I did look at the world that way

41:34 I build all my companies for forever. And this is true at Z M C as well. We know we're gonna sell a company within ten years of buying it'cause our fund documents require us to do so. But we're building that company for twenty or thirty years. And we do that because it's the right thing to do. Because our stakeholders are not just

41:54 our financial investors, they include our colleagues at the companies, they include our customers. We deserve the best. And need the best if they're gonna Bring us their Wallets.

42:04 So we've always been willing to invest beyond our hold period. You of course do get paid for that too. If you deliver or buyer a phenomenal company, you're gonna get a multiple that reflects that. If you deliver solidity and

42:16 permanents or something close to permanence, you're going to get paid for that. But it happens to be consistent with our DNA and how I like to look at the world. But it is true that if I were just cravenly selfish and said, you know what, I'm gonna get out of Dodge in five years. No matter what, come in hell or high water five years from now. And I just want to have the maximum share price when I get out. Yeah. Stop investing in new IP, period. Any guiding principles for

42:39 what IP is good versus bad versus great. How do you think about the quality of IP as you explore those opportunities? Bottom line is derivative IP is generally speaking not gonna be hugely successful, but could be moderately successful at certain times. I never liked doing derivative IP. That's when you notice in the film business there are three movies being made about Robin Hood at the same time.

43:04 Oh Huge hits are by definition unexpected. Good example of interactive entertainment is Red Dead. Before Red Dead was released, conventional wisdom in the interactive entertainment business was Westerns Don't Work. Period full stop Westerns don't work. Red Deck comes along completely unexpected. Expected spectacular production values.

43:23 Really something no wonderful games. Spectacularly beautiful and emotional and No one had seen it before and it was a huge hit. An example from my recorded music days was conventional wisdom when I was at BMG, which was one of the major label groups

43:38 Was the Boy bands don't work. Mm. Clive called her. Brought out.

43:43 Backstreet boys. And conventional wisdom was that girl bands don't work. And then We had Britney Spears and

43:51 Christian Aguilar and Keep going. Conventional wisdom was that rock and roll was dead for a period of time, and then RCA records brought out Dave Matthews. The list goes on. And in motion pictures conventional wisdom was it a comedy has to have big stars and big concept and

44:09 Then we brought out Home Alone. Storm. Collie Calcon, who no one knew. And That was the highest grossing comedy of all time.

44:16 The biggest hits are by their nature unexpected. Which means that you can't organize around them with AI. So I'm not worried about AI. Eating our collective lunches in the entertainment business. So the key is unexpected and original. You said something which gives me my excuse to ask you about the world of health and fitness.

44:36 a shared passion of ours for sure. You wrote a book called Becoming Ageless, and you said just a minute ago, you expect to live forever. Talk me through the source of your interest in this area because I've come to believe that a good foundation of health is actually one of the smartest things you can do if you want a great business career because the energy that you bring to bear is a huge part of your success or failure. So tell me your story about getting interested in this. What was your entree? Why'd you write the book?

45:00 I think My entree into this was just purely vanity. I started aging, I thought I just wanna keep looking good as long as I can. And then I think it just became a game. Can I do this thing at a high level?

45:11 Even as I age. And then it turned into a community and that made it just Incredibly powerful. So it started from this Very unimpressive place for vanity.

45:22 Got to a challenge and then it turned into big part of my social life, which is I have this Tribe of athletes that I train with who are

45:33 Of all ages, but they skew very young. And I train highly competitively in that group despite my advanced stage. And I feel great. I feel like I'm twenty five. I know I'm not twenty five. I I know I don't look twenty five, but I do feel that way. And I don't just feel that way physically, I feel that way emotionally. spiritually and creatively. And

45:51 I got really turned on to this notion of health span. And fitness. When I saw the effects of getting engaged. And

46:01 Taking care of yourself. By going to the doctor, taking care of yourself by eating reasonably well. I don't have a s hugely strict diet, but I eat reasonably well. That I'm not overweight. Take care of yourself by getting lots of exercise. And taking care of yourself by having a spiritual practice.

46:17 And a community. And all of those things together have brought me a really good life and a life that I want to keep engaging in. I wrote the book because about seven years ago, because my good friend Dave Zazenko, who had been editor in chief of men's health, Sad. This is amazing.

46:34 You're in your late fifties, I knocking on the door of sixty at the time. And You're in great shape and You look good and

46:41 you need to explain to people like how this is possible and Becoming ageless really Does not to take the position that you're not gonna age or you're gonna age in reverse tempting as it would be to take that position. But rather that you have an opportunity to be your best self without regard to your chronological age. And that you can do a lot of things for a really long time despite aging.

47:01 I don't believe it's possible. I'm not one of the Silicon Valley guys who believe I'm gonna live to a hundred and fifty. To the contrary, actually there's very little evidence that anything I'm doing really changes your life span much. Maybe you change your lifespan by about five years on the outside. There's a lot of evidence that you change your health span. Peter Atia was my doctor for four years. He wrote the forward to the book. He and I share a view that health span is what matters.

47:24 And if Peter were sitting here, he would not say, Oh, Strauss is in great shape. He's gonna live to be a hundred and five. First of all, he'd acknowledge he doesn't know how long I'm gonna live. Secondly, he would acknowledge that everything I'm doing and I do what he recommends. Maybe gives me five more years. And that's Barring some kind of getting ALS or something that I could get without knowing I'm gonna get it, or having a horrible accident.

47:44 I can walk outside and get hit by a truck. I hope I won't, but I could. And I got really engaged in this, and I thought If I wrote a good enough book, then then maybe I would help other people. And

47:56 That goes back to my view that One of the most successful parts of my life has been driven by being of service to others. The book actually sold really well. It sold well over a hundred thousand copies. I continue to run into people who say, I read your book and I lost thirty pounds and I feel great. Has been the most surprising

48:13 aspect of this part of your life, a lesson you learned or something counterintuitive about the way you now live your life. with Hellspan in mind. That maybe you wouldn't have expected when you were thirty or twenty five or something. I certainly wouldn't have expected at thirty that I would be sixty six years old and my primary training buddy is twenty four.

48:34 And we train at the same level and he's a fitness model. And that he choose To have me as his primary training body. That wouldn't have occurred to me. That this morning I trained with

48:44 ten incredibly fit people and I was right there. With them. The oldest person in that group was probably thirty. Two And it wouldn't have occurred to me that I could feel this way.

48:54 When I was thirty, sixty six was really old. And It didn't occur to me that I could feel the way I feel at sixty six or still be standing straight up and still be the same height I was when I was eighteen and still be

49:07 I'm wearing the same size clothing I wore thirty years ago. And that I feel the way I do, I feel amazing. Do you think that that transfers in meaningful ways over into other aspects, maybe business most specific? It transfers into leadership because I think showing up feeling good and presenting yourself as the best version of yourself is compelling to other people. Helps you lead. Showing up.

49:28 Looking like you had some weird surgical procedure to look thirty years old is not going to be a benefit. My face looks my age. Give me a few years, maybe, but you don't see me and say, Oh my God, this guy's thirty years old. You see me and so maybe I'm gonna get really lucky and you say maybe this guy's in his late fifties. That's how I ought to look. I'm not trying to look Different than I am. And if I were, that would be terribly off putting to people.

49:51 As you would expect. But I think it is compelling when you show up and You're reasonably well dressed and Doesn't mean you have to spend a lot of money on clothing, but You're together and your clothing is clean and it fits you and you have a haircut. Your skin is not grey and ashen

50:05 You don't smell bad and All of that stuff actually does matter, and I think it's a sign of respect for yourself and respect for others to show up as your best self. And that does include how you present yourself physically. Who's the best leader you've ever seen? I'm really fortunate. I have a lot of mentors. They have different characteristics and it takes different qualities. There isn't one Approach.

50:26 The best I haven't seen, but I think m many people would agree was one of the great leaders of all time was George Washington and Abraham Lincoln actually were great leaders. Washington particularly was known to be an amazing leader and I've read a bunch of Presidential biographies. That I've seen Dick Parsons was a great leader. And he too truly cared about people.

50:46 He's also super smart and he makes really sound decisions. Dick Parsons was CEO of Time Warner. He's one of those people who could synthesize huge amounts of information and arrive at the right conclusion. Who is politically savvy without being a political person.

51:01 have to get up really early in the morning to get over on Dick Parsons. But never had a negative word. Always had a smile, always engaged with you as though you were the most important person in the room. He was a phenomenal leader, but there's so many of them. In the private equity business, Don Gogell again.

51:20 A person of modest demeanor, quiet confidence. A brilliant person, he's got a great brain. A truly kind person. Barry Diller's a great leader, very different style. A very tough style and not to everyone's liking. Very much to my liking.

51:33 He was pretty critical. But I'm really critical of myself. And I knew when I was thirty two years old and I was president of Fox, I knew I didn't know anything. And I told you where I almost failed. I was not unaware of the fact that I was nearly failing. This was very obvious to me. So having a really smart boss who understood the entertainment business better than anyone else was prepared to teach that to me and would engage with me, he had the patience to Engage in robust debate.

51:59 It was amazing. And I used to say like I would argue with them. All the time. And I don't know, ninety eight percent of the time he was right. Which is incredible,'cause I am reasonably intelligent and well versed in what I do. So what does that mean?

52:11 Because I'm not insecure about my intellect. And I was aware of my lack of experience. What it meant was I realized I was going to school and this person was willing to be my teacher. Not sure he'd see it that way, yeah. I imagine I caused him no shortage of frustration. But he was amazing.

52:26 Leader. He got the best out of me, he got the best out of a lot of people. He had flaws and has flaws. We all do. My style is quite different than his.

52:36 But was his style. And is his style effective? Highly effective. You bringing him up makes me wonder what you think the role of boldness. is in leadership. In the absence of intelligence, there is no good role for boldness, and we've seen that with people.

52:50 I think having conviction when you know something And that something is rooted in the facts is valuable. I think having conviction when you don't know something, but you just believe it is magical thinking and it's Very dangerous. We do need to

53:05 As leaders and decision makers. Be willing to take in as much information as we can within reason. synthesize the information successfully and arrive at a conclusion and then more often than not we better be right. And

53:19 in those situations you do have to act with conviction. There's an executive who was brilliant, I'm not gonna say his name at Fox. I think he understood the entertainment business better than almost anyone else, and he was well known too. And certainly he was as brilliant about the entertainment business as Barry. But he was a lawyer by training and he didn't like making decisions, so he would equivocate. Mm.

53:41 And he would at times just analyze and equivocate. So much that the moment would pass. So what I learned is You do have to decide.

53:50 You gotta decide. That's what you're paid to do. And the hardest thing I do is make a decision when everything's unclear. What I'm willing to do, is if you have been able to tell from this conversation, is I'm open minded. I want to listen to others, I care about their opinions. I have no trouble

54:06 Saying that I'm wrong. I have no trouble changing my mind when there's new evidence. But when we've agreed upon a course of action or an certain limited instances I've decided on a course of action. I know you have to have conviction and you have to pursue it to the end. Decision making under uncertainty is a fascinating topic area. And I'm curious how to zoom it in on take two specifically.

54:28 How you've thought about technology's role. through the introduction of new platforms. So you had the console cycle that you rode for a while, then there's mobile, and obviously you own Zinga now. So you have a mobile free to play presence. There's other looming potential platform shifts right now, a couple of them That are fascinating. How do you think about an approach? those things as both risks and opportunities

54:50 For the business and the franchises. We stay away from huge Pronouncements and massive shifts. In the absence of market. Evidence.

55:00 Because if you own Intellectual property. That matters. You can be late on a platform and still be just fine. You don't have to be the first to the party with a marketing idea.

55:12 Or platform support, although we often are. You don't really get paid for that. If you're in the content business, you get paid for the content. I'm a believer that in business, if you don't have to vote, don't vote.

55:23 If you don't have to make a choice, don't make that choice. Keep all your options open. And we try to be where the consumer is, we try to use every distribution method that we can. We try to be ubiquitous. We're not the kind of people who think about if I shut down all this over here and I have that I can drive more margin there. I worry about how to get the consumer there. We think about

55:44 Let's have the broadest possible business. Let's meet the consumer where the consumer is. let's drive margin where we can and acknowledge that in certain other instances, as long as the margin's acceptable, it may be A bit. inferior to margin in other areas, but on balance we want to have the largest possible pie. If you think about the whole business, what is something that people believe about Tay Two to be true that isn't true?

56:06 Think these days pretty much people have gotten the memo. I think there was a period of time where people believed that my stated desire to be a friend to talent. Combined with our decentralized approach meant that

56:21 I had no clue what our labels were doing and they would just tell us what they're doing and then we would have to live with it. And that completely misunderstood what actually goes on, which is We have a highly communicative And

56:35 deeply intertwine senior management team across label and corporate. And We have a lot of Creative independence of the labels. And frankly, independents among executives because people are given jobs to do and then we want them to do their jobs the way they see fit.

56:50 But we have lots of communication. I'm a fan of saying I believe in Delegation with communication. Among the most dangerous words you can say at a corporation are I don't care how you do it, just do it. That's great. That's how you end up being noncompliant. That's how you end up tanking your company. That's how you over leverage your company. That's how you go bankrupt. That's how you go to jail. I do care how you do it. I really care how you do it. You have to do it in the right way. It has to be consistent with our strategy. It has to be consistent with our culture and it has to be legally compliant and ethically compliant.

57:22 I never knows that. But I do believe in delegation. I just want to know what's going on. And When there's a problem, I want to be the first

57:30 Call. The first call. I am including the middle of the night. Even recently I will occasionally have people inside the organization. Now we're a big organization, if you include ZMC, it's very big organization. And I would people say

57:42 Here's what's going on. I'd be like, When did this come down? And be like A week ago and I was like and I didn't know about it and they were like We don't want to just show up with a problem. We want to show up with some solutions. I'm like, that is a really great thing that you thought about. I want to know about the problem. You don't have to show up with a solution. I want to know with the problem. I need to know. I can't be surprised. The other thing is if you wanna have that kind of communication in your organization Then you can't shoot the messenger.

58:03 You can't be a screamer, you can't be hysterical. You can't. React. I've gotten some really bad business news in my career, like really bad news. Um

58:15 I don't think I've ever raised my voice. A bad news. I don't think ever. I've got some really bad news. If you think about the video game production process, which now for something like Grand Theft Auto is an enormous multi year, incredibly expensive, like a great feature film or something.

58:30 What Contrast would you draw. From seeing that happen. to also seeing other great big media things get built, whether that's a film or a show or a record or any other form of media. What to you is most interesting and distinctive about the production of one of these

58:45 Really big. franchises. That so many people work on the project and that the project is largely created in a computer. Not entirely. We have motion capture, we have voice actors, we have physical actors. It's a multi year project and the bulk of the creator work is digital. And that's very different than recorded music, which is

59:05 Unless it's dance music, uh electronic dance music is really largely analog. converted to digital. And Motion pictures and television, which was still entirely analog. Unless it's an animated movie. Or special effect.

59:17 That's Very distinctive. It also makes it harder. And it requires other skills. One of the reasons that

59:23 Hollywood talent has some translated to interactive entertainment is you actually have to have a certain kind of technical education to work in interactive entertainment that you do not need to work in filmed entertainment or television or music for that matter. If you think across the businesses. history when you've been a part of it. Does a defining moment Pop to memory.

59:42 Oh so many defining moments. But usually defining moments for me are when I've gotten it wrong. When I went to Crystal Dynamics, I didn't understand anything about the characteristics of the interactive entertainment business. So I've been recruited to go to this company and Crystal Dynamics was started

59:58 To make thirty two bit games for a new platform called three DO. And I didn't realize. And this is amazing to say, but it's true, that there were different platforms in interactive entertainment. I came from movies. When you made a movie it's not like

1:00:12 You could put in Regal cinemas but not national amusement cinemas'cause they had different equipment. Or worse, that you needed a license from Regal or National Amusements to actually exhibit a movie. On their technology. But that's how the interactive entertainment business works. I show up in Silicon Valley.

1:00:29 First day at work. thinking that we're making potentially the best hits'cause that was the story that I was told when I was recruited. It was like we're gonna make the highest quality stuff for this Rapidly growing medium. And then I realized within a day or two that we were only making it compatible with three DO. And then I was like, So tell me, what's the install base of three DO? And the answer was it's zero. I was like Oh my God.

1:00:47 I've taken my entire career. You're looking at the only person on earth who's ever voluntarily stepped down from the job of president of a major film studio. I've done that. I didn't get paid or anything to get I saw fired and got paid. I walked away without getting paid and walked away from my bonus that year. And Then I took my entire net worth and invested it in crystal dynamic stock. I was a largest shareholder. I was a bigger shareholder than Kleiner Perkins. And had taken our wealth, my family's wealth, which was

1:01:11 To minimus, but it was a few bucks. Yeah. And now you're telling me that We could put out the games we're working on now and no one might be able to consume them because they have the wrong equipment. Oh my God. First fail. This is like day three on the job and I called up the folks at Kleiner Perkins and said

1:01:26 We need to become a multi-platform company. And they were like, No, no, you're gonna make games for three DO. I said, Yeah, we're gonna keep making games for three DO. But if three DO fails, I don't want us to fail. So we can't have that as dependencies. We're gonna have to make games for other platforms. They didn't like that very much. By the way, three DO did fail. strategically sound that we did this'cause

1:01:45 Why have two losses in a row as opposed to just one? And then My next fail. So then I was like, Okay, great, I'm gonna go see in those days Sega and Nintendo and explain that we're gonna make games for them. Not knowing that they had to agree.

1:01:57 I didn't understand that notion. So I go meet the president of Sega, who is an old friend of mine, luckily. And I said we'd like to a license to make games for you at this point, I figured out date four, like you need a license. Okay, we'll see. Calls me back the next day. Turns out you recruit one of your two co-founders from Sega and sort of team here really isn't very interested in Letting you have a license.

1:02:18 No. And we went to Nintendo and said there's the other big platform player. They said, Okay, thank you very much. They were Japanese, so polite get back to you in a couple of days. I call back a couple of days later. We just realized that all of your engineers have been recruited from Nintendo, so we don't think we're gonna give you a license. So I'm like, Oh my god, second fail. I'm stuck at three DO. Very fortunately Sony had decided they were gonna get into the video game business right then. And they didn't have any third parties.

1:02:43 third parties are companies not owned by the hardware Who may titles for the system in question. Luckily, the new head of Sony Interactive was an old friend of mine, Olaf Olafson. This is like day six, I flew to New York, meeting with Olaf, thankfully, and said

1:02:58 Here's what we're doing at Crystal Dynamics. We'd like license to be your first third party. And he was like, You know what, this looks interesting. I trust you, we know each other. Done. I'm sending over dev kit. And by day seven, we were a multi platform company. And thankfully we were, because again, three DO Got launched, we sold a few units, we had a couple of bundles, we did okay. But we were Sony. supplier and obviously Sony's PlayStations. Usually successful.

1:03:22 What do you want? the business to be. First of all, our strategy from the beginning has been and remains to be the most creative, the most innovative, and the most efficient company in the entertainment business. I wish I could say we were all those things. We're not. We still aspire to be those things. I think on good days we're the most creative, but Not always. And certainly there are other very creative companies.

1:03:43 On good days we're the most efficient, but not always we have work to do. And I'm very good days were the most innovative, but that's the area that probably needs the most work. Because innovation and efficiency don't necessarily go together. That's what we aspire to do.

1:03:56 We would like to be the number one pure play in the space. We're now number three if Activision gets bought by Microsoft, we will become number two by default. Still someone ahead of us, so We got some work to do. And that's not just for bragging rights.

1:04:09 Your number one. you probably enjoy a higher valuation and you probably have even better access to talent. Why is there a difference between creativity and innovation? Innovation is being the first company to get into mobile, not the last.

1:04:25 Why is that important? Because if you choose right You create outsized value. We missed the boat. I missed the boat on that. Now in fairness when mobile business Was

1:04:33 Coming about it. we were really still doing a turnaround and we had to focus on our core business, which was console. But it's also true that I greatly underestimated the potential of the mobile business. I don't want to make mistakes like that. Combining that with your earlier answer, is the sweet spot Early recognition

1:04:50 Wait for some evidence. And then be as early as you can be. Yeah, and generally speaking, with creative matters, you have to be at the front of the line. With

1:04:59 business matters, you don't have to be at the front of the line with matters it's sort of bridged the two like AI. Have to be close to the front of the line, but maybe not at the front of the line. And efficiency, what does that mean? That can mean a lot of things. That means running a really tight ship. That means not having resorts and

1:05:16 Chaplanes and private dining rooms and campuses and security guards and all that crap. We don't have any of that. I'm here today in your studio. I showed up.

1:05:26 There's no downstairs with little earpiece with a notepad saying Mr Soundmick it's time. I don't have any of that. It's a big company. It's a twenty eight billion dollar enterprise. I don't have a staff with me today. I got dropped off. Um walked into my own power and carrying my own iPad and That's how we operate.

1:05:43 What Are the things that motivate you? What gets you? When I was energetic business school, they had a class that discussed motivation. At that time they said there are three things that tend to motivate people in business. Money.

1:05:56 Power and achievement. And I thought, oh, that's interesting. So money. I definitely was ambitious to make a good living. I didn't come from wealth and I wanted to have a nice life. But I didn't have a desire and I knew this about myself for endless amounts of money. Yeah, I didn't need to be the richest person in my class, never mind, on earth. And I didn't find money motivating as a thing of its own. I found money motivating in terms of being able to pay the bills without Worry and Educate my kids and live nicely.

1:06:21 So I didn't think money was my motivation and I was right about that in the fullness of time. It's not really something that motivates me. Power definitely not, because first of all, I don't think business executives are powerful. I don't enjoy exerting my will over other human beings. I don't enjoy being Awesome. And when I found myself engaging in that behavior, I'm not proud of it. And thankfully that behavior's long in the past was sort of adolescent behavior. So I'm not

1:06:45 power focus person, but achievement very much. I like doing things, I really like doing hard things. I probably like doing hard things too much. That speaks to my physical activities, it speaks to My friendships speaks to my marriage, my relationship with my kids. And very much speaks to my business career where I chose to do turnarounds that other people's would not touch, including Take Two.

1:07:07 And I like to do hard things. I think there's an element of ego baked in there because it's kinda cool to say I took on this really huge challenge and succeeded. And my business career, frankly. does have a lot more success than

1:07:20 Lack of success in it. I've had plenty of stuff that went wrong, but Never lost money on a deal. I've never failed to repay debt. I've always created value for shareholders and I'm really proud of that. And some of those deals have been incredibly hard. So I tend to be motivated by achieving hard things.

1:07:35 What do you think of the notion of a masterpiece? Do you think you've had a masterpiece? I think I have enough. I would say humility, but it's simply just uh awareness of reality and to know that I'm not living in masterpiece land. I think some of the products that we put out are masterpieces, but they're not my masterpieces. There are creative folks' masterpieces. And I get to tag along and enjoy

1:07:56 the fruits of that labor. But they're not mine. And maybe if there were masterpieces in my life it would be some of relationships I have. Which are so meaningful to me. And in certain instances

1:08:10 When I've been able to help. People achieve their own personal or professional goals. And I wouldn't talk about them because they're Private to those people.

1:08:19 But probably the things if I'm proud of anything would be proud of Pride in that. And that's probably where also I've been able to make a real difference. But Some of the masterpieces, yes, there's some really cool deals that I've been involved with and really cool properties. But all that stuff's ephemeral. And

1:08:34 deeply ephemeral. Whereas the stuff that I've focused on that matters. I probably can't quote. Or wouldn't quote to you. And if I did, maybe it wouldn't even mean anything to you, but it does mean something to me. Helping other people achieve their potential.

1:08:48 helping other people live great lives, helping other people Do interesting things and helping other people become happy and productive. If I have something that It was my own masterpiece, it would be that. And then I've done a couple of cool things along the way that I'm really proud of, but probably not gonna talk about'em.

1:09:05 What are the most common things that people need? in support in the way you just described. I'm not asking for the specifics, but when you think about What resources or whatever it is that somebody needs to

1:09:18 attain their potential in the way you described earlier. Are there most common ways that People need a certain thing. There's this tactine term now people want to be seen, but Truth is people want to be understood.

1:09:28 And People want to Acknowledged. And People want to be cared for.

1:09:35 And I actually really care about other people. I really care about my friends, my family, and my teams. genuinely care about them. And people know that. And I will move heaven and earth. to help them achieve their ambitions.

1:09:48 And they know that too. And then I do that. I don't just talk about it, I actually do it. And I do it without noise or smoke or flourish or congratulations. I just Take it on. It's my job. I do it and I do it.

1:10:01 I think quietly and with a sense typically of Grace and kindness. I have young kids of an age that has me thinking about this a lot. If I were to ask your kids what mattered most to you As a parent, what do you think they'd say? First of all, I have a great relationship with all three of my kids. But if they were candid, it's not like they would sit here and come up with a lot of superlatives. Okay. I think they would say that excellence really mattered to me. And I think they would say that

1:10:27 Integrity mattered and pursuing their passions mattered to me. But I think they would probably arrive at the conclusion that excellence really mattered. Thinking back to Carnegie's book. be like my traditional closing question for everybody. What is the kindest thing that anyone's ever done for you? I lost both my parents when I was a kid and my aunt and uncle took

1:10:48 My siblings and me into their home and raised us as their children. One of my Very closest friends. His father lost his dad when he was fifteen in Africa and they had to make a choice to take over

1:11:00 the family business, which was one of the early Safari lodges. And so at fifteen him and his brother took this thing over and effectively birthed it's the Vardy family birthed modern Safari as it's known. And I'm curious if you're willing. I just would love to hear how that shaped you because

1:11:16 I've talked to Dave Vardy Person in question about this. And of course, it's two very different sides. There's very good things and very bad things. And I'm just curious. how much you would attribute to having t sadly Deal with that at a young age. I think great loss when you're little and I had m multiple childhood losses all by the age of ten.

1:11:36 lead to one of two things typically. One is a sense of victimization and that can really lead to pretty failed life. Or since then. I'm gonna work. Really hard to overcome this. Or

1:11:48 really hard so this doesn't happen again, or really hard so I'm not at risk. And I think that's where it took me, which is I was already a bit of a perfectionist. And I think that that put a fine point on being a perfectionist, which It was Challenging for me personally, but frankly, professionally. Within reason it's stood me a good stat now with a lot of work. I think I've balanced that out.

1:12:08 So for me it was sad and a motivator. And I think it also caused me to see life as Potentially temporary. I was in a hurry because I thought wow things could really change and not change for the better. And It also because I did come from that, I did err on the side of empathy for others.

1:12:26 I think I was more inclined to feel empathy for other people. I think you could go in the other direction if you like. Hey, I got the short end of the stick, so screw you, but that was not my way, I thought. Challenging things. a current people's lives. Most people have tough things in their life. At some point.

1:12:41 Almost everyone. So I think it brought me to a place of Great ambition and also turn me in the direction of empathy, but it took me a while to get there. The ambition and perfectionism loomed large for probably the first

1:12:55 thirty five years of my life, and then with some measure of success, because things came relatively early to me. and a lot of personal work. I reached a point of bringing out probably some of my finer qualities and Maybe mitigating some of the Qualiti that were driven by this childhood baggage in a negative way. Stress, this has been such an interesting conversation. I'm really appreciative of your time. Thanks for sharing everything you did today.

1:13:18 Thanks for having me. Mm. If you enjoyed this episode, check out Join Colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.

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