Strauss Zelnick, Take-Two Interactive

23:06The studio system was long gone. And studio system means your creative talent, all your talent is on the payroll. Boutique system is they're not on your payroll. They can auction their services. And obviously, if talented people are auctioning their services for every project, it's going to be much more expensive than if they're on your payroll in success. So you have a structure in the motion picture business since 55, essentially. It didn't happen overnight in 55, but by the late 60s, early 70s, mid-70s, where it's heads I win, tails you lose. If the project does well, the boutique extracts a lot of the value because of the deal they were able to negotiate, so they didn't go across the street.

23:45And if it's a flop, you as the studio bear the entire cost of the flop, obviously. Whereas in the studio system, recorded music before its most recent changes was essentially a studio system. Video games to this day is a studio system. In success, you obviously pay your creative people. And we are incredibly generous in the way that we compensate our creative people for success. But the company also has an opportunity to create a return. I was aware that the economics of the film business were really lousy and that you can't fight that. There was a Buffett aphorism, which I'm going to get wrong, but the aphorism was to the effect of if you take a management team with a reputation for brilliance and a business with a reputation for being bad, it is the business's reputation that will stay intact.

24:39And again, I didn't, that wasn't an elegant version, but you get the idea. So I actually saw this in Forbes magazine those days, you read magazines, it was in the back, remember they had quotes in the back of Forbes and I read, it was like, that's what I'm dealing with here. And I've been really fortunate. And Bastron did well because we made hits and Fox is doing well because we make hits. But you can't fight the underlying structure of the business. So my blinding flash to the obvious was I thought to myself, see, here's the thing. As it turns out, my ambition had been to run a movie studio.

25:07And as it turns out, my ambition should have been to run a movie studio in 1927, not a studio in 1991, whatever it is. So I think to myself, what is the moral equivalent of the motion picture business in the 1920s? and thought, it's a video game business. How did you know that? Because I was a student of the business and I was aware that video games were a thing. And I was aware that they were, despite the issue that Atari and Warner Communications had, it was still a growing business. And by the early 90s, it was a real business. It was a small business, but it was a real business. And I looked at it and I said, I think this is going to be huge.

25:46And remember, that was a very unpopular view in the entertainment business because of the Atari disaster, which people still saw in bright, flashing neon. So almost the way you get what you called in the past, like the religion on video games, is by comparing it to like, what is the movie studio version of that today? Yeah, to your point about being a student of the business. Okay, so then you have that insight. Yeah, so now I've been at this studio for whatever it was, nearly four years, and we've had a great run. And I think I need to go do the video game business. So what's your next move? I went to Rupert and I said, next big business is the video game business.

26:25And I remember sitting in his office and I said, so I think we should be in that business. He said, great, go start one. And I said, yeah, I'd love to do that. You know, while I do my day job, which was now I've been promoted. I was now running the creative and business side, working for then Peter Chernin, because Joe and Barry both had left. And he said, great, you could do it. We'll give you the capital. You can pursue it and build a video game business. And I said, well, the only thing is like, I see it as an entrepreneurial venture, so I'd like a piece of it. And he said, no interest. Like, that's not an offer.

26:54All right, why do you say no? Because Ripper doesn't have partners in his businesses except as public shareholders. Okay. And it's just as, you know, there's nothing like, there's nothing wrong with that. It was just his approach. And he didn't pause, but it wasn't like he paused. Oh, let me think about it. He was like, no. So I was like, okay, I guess I have to think about, you know, am I serious about this thing? And then coincidentally, I got a call from a recruiter saying there's a startup pre-revenue video game business in Silicon Valley that is doing the most advanced video games. They're really going to be the next generation of video games.

27:26Are you interested? And I left. I took a 95 % pay cut and moved my family from our beautiful house in West LA to Atherton to a rental house that was going to be torn down. So it was maybe a little dated inside. It was about to be torn down for a golf course. Because you wanted equity. You wanted ownership. I wanted to build something, and I wanted equity. But primarily what motivated me was this notion of being at the cutting edge of media and entertainment. And the fact that it was driven by technology made it even more appealing. Did you think that you were always going to be an entrepreneur?

28:03Because at this point, if I understand your career, you've always just had jobs. You're a phenomenal operator. You're a business guy. But in your heart, you're like, I feel like I should be running my own thing. I should be an entrepreneur? Yes. And I wasn't ready, as it turns out. So, but I did think that. And I know I wasn't really a born entrepreneur because I was a good employee and I liked running big businesses for other people. But I also knew that if I really wanted to build something meaningful, I had to take a risk. Why do you say you weren't ready? I didn't have much money and I had a young family.

28:31And I think there are kind of two stages in life to be an entrepreneur before you have anything and any responsibilities and obligations and after you have some protection. And I was right in the middle. I had some responsibilities. I had no protection. So emotionally, it was very challenging for me. And I don't think I was emotionally ready. So I did it for a couple of years. Crystal Dynamics was very successful. Not hugely successful, but it still exists today. I don't think I know the story of Crystal Dynamics. That was the company that preferred it. Tell me about the company. Well, it was set up by Kleiner Perkins, backing two very talented women with backgrounds at Sega at the time.

29:10and they needed a CEO and they wanted a CEO from the entertainment business. So hired me. And literally it was a video game studio? Yeah. So I set it up. I got them distribution deals. I raised a bunch of capital, lots of capital because I hadn't raised much capital. And then I was recruited to go turn around a huge record company back in the days when that was not an oxymoron. And I decided I'm really not ready to be an entrepreneur going forward quite yet given this opportunity. and that record company, which was called BMG, agreed that I could start a video game division inside the company.

29:46Before you took the job? Correct. Okay, because I was going to say the jump from, you got religion on video games, and now we're jumping from video games to music. Why'd you do that? Okay, so. Another turnaround. It was really interesting. I'd never done music, and they said I could start a video game company. Strauss Zelnick prides himself on running what he calls a rational organization. He said that he tells his talent that the company they build We'll be efficient, organized, we'll make sound decisions, we will be calm, and we will be well financed. He tells them that no one will let their ego interfere with what you do, and no one will take credit for what you do.

30:20We won't do anything crazy, and we won't go bankrupt. I've spent a bunch of time with Adam, who's the founder of AppLovin, and I would describe the way that he runs his business and the way that Strauss runs his business as hyper-competence matched with ruthless efficiency. Both Strauss and Adam want to build world-class products, and that is exactly what Adam and his team have done with their advertising platform, Axon. Axon connects you with over a billion potential new customers. Axon allows you to capture undivided attention. Axon ads are full-screen videos that are watched for an average of 35 seconds.

30:54That is retention that blows other ad platforms out of the water, and you can launch in minutes. You set the goal, and Axon achieves it. No complex setup, no expertise needed. And Axon scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scaled to hundreds of thousands of dollars a day in spend and increased their revenue by millions. So you want to get started quickly before all of your competitors are on Axon and you can do that by going to axon.ai forward slash Senra that is axon.ai forward slash Senra so talk about starting the video game company inside of bmg so i'ma hire jay moses who's now on the board of take two and the model was external development so making deals with external developers and we were going to use the bmg recorded music distribution system to distribute worldwide which was pretty smart because we had this massive worldwide system of off local offices so we could slot right into it without adding any overhead.

31:54That was the beauty of doing this. Say more about that. Well, in those days, when you distributed records, you actually had to have physical offices to go sell physical discs, CDs, the beginning of CDs and the end of vinyl to stores. Very similar to video games at that time because you're buying physical. Exactly. You're buying cartridges and then eventually discs. Were any other music companies doing music and video games? No. Oh, that's smart. No. So we put aside a small amount of capital for BMG because in those days, BMG's revenue was$5 billion a year, and it was very profitable. And I think we devoted around$40 million to investing in this basket of games and building up the distribution system and hiring a team.

32:41Can I pause you there? Sure. At this point, video games, like there's no free-to-play. You can't download anything over the internet, right? Correct. So the economics of the video game is very similar to recorded music. It's you're buying... Somewhere between toys and recorded music. It was a top 10 business and most of the sales were in the fourth quarter. It had a lot of aspects of the toy business. And there were still cartridges that hadn't shifted entirely over to discs. So you had all the messy inventory characteristics of a cartridge business. So it had plenty of hair on it as a business that it no longer has.

33:17But did you have any inclination at that time that there would be an end to the cartridge? Oh, sure. No, I knew it was becoming a disc business, absolutely. You couldn't predict what was going to happen after discs? No. Okay. No. So go back to where we are on the story, sorry. So anyhow, by the way, I'm running the record company. That's my day job because it's a big business. Jay is building up the video game company with my oversight. But it's a, you know, it's a, it's kind of gorgeous project. It's a tiny little project. Yeah, he said$40 million compared to revenues of$5 billion. It was like a rounding error.

33:49OK. And he created, his team created a whole bunch of properties. And we're getting ready to distribute some of them as they've been completed. And there was a new CEO, Bertelsmann, the parent company at BMG, whose name was Thomas Middlehoff. And he decided the video game business was a terrible business. And he told me to divest the whole thing. And I said, wait, wait, we've already invested. The only thing left to do is distribute the titles. That's the only thing that's left. So let me do that. And then you decide, depending on how it goes. And he said, no, just sell it to the highest bidder.

34:30I said, but there won't be any bidders. It's like in production video games, there's not going to be a lot of appetite for this. And he said, I don't care. Just sell it. So why? He just didn't believe. OK. He was a person who, you know, bet on his gut. It didn't work out very well for him at all. At all. That's a separate story for another day. And so we go out to market, not a lot of bids, and we find a buyer. And the buyer agrees. It's a little tiny public company with a, I want to say, roughly$100 million market cap. And they agree to give us 20 % of their company in stock for the business, such as it was.

35:12So$20 million. And so we close that deal. Now we own 20 % of this company. And I go to Thomas, and I said, listen, we have$5 billion in revenue. Like, this is$20 million of stock. It's a rounding error on a rounding error. Why don't we just hold the stock, see what happens? He said, no, sell the stock in the open market. So we sell this to him. What the hell, dude? Precisely. So we sell the stock in the open market for, wait for it,$14 million. So a month later, this public company launches the first property that we had completed into the market. Oh, no. Don't tell it. Don't say it. So the name of the public company was Take-Two Interactive.

35:52And the first release was Grand Theft Auto. We're going to pause right here, though. Grand Theft Auto is the most successful media property of all time? I think so, yeah. Yeah. Okay. Yeah. Yeah. So, um, all right. So that's, that's my war story. I'm being in the video game business. Now, remember now I'm out of the video game business. I'm running a record company. You had to be pissed off at this time, right? You know, I didn't own the company and I don't like, I don't get pissed off easily. Like I understood I'm on the payroll. I'm, this is my boss. He gets to make strategic decisions like this.

36:26I knew it was a foolish decision. But how could you think that you were going to work? Did you, maybe you didn't, there's no way if you see this person making decisions like that, that you're like, oh, I'm going to work for this person. That's correct. I did leave. I did leave. Okay. So then what happens next? I realize it's time to go. And now I'm ready to be an entrepreneur because I have a vision for what I want to build. And I have a few bucks in the bank, so my family's not going to starve because I saved well. And I made a lot of money, you know, as a professional executive. So I decided to start ZMC.

37:00Explain what ZMC is, though. Well, today it's a private equity firm. Okay. So we raise capital from institutions in funds, and then we buy companies and build them and then eventually sell them to create a return. Okay. But at that time, that wasn't the vision. The vision was to create an entity that would build a portfolio of media and entertainment properties that are supercharged by technology. That was the thesis. And again, this is 01. And I thought it was a pretty obvious thesis, but in retrospect, it was not. And if that is your thesis, then video games is the perfect thing to do. Well, yes and no, actually.

37:34I didn't have an appetite to go back into video games when I started DMC. First of all, I've been there and done that twice. Secondly, it still was kind of a top 10, fourth quarter toy-ish business with bad inventory characteristics. Oh, because it's 2001. Yeah, and no, and it was cyclical. And, you know, the console generation would, you know, cause the business sort of come and go. And no, I wasn't anxious to get back into that business. What's the first thing you're doing with ZMC? We started - Buying take two stock? No, I wish. No, direct marketing companies that were becoming digital, market research companies that were becoming digital.

38:10We turned around a Japanese record company of all things. So, you know, whatever deals that we could find, often very, very troubled companies. Because remember, we had no capital. Oh, I left that part out. We had no capital. So how do you start a company with no capital? Exactly. So I put in$300 ,000 of my own money. I convinced people to work for free. We borrowed offices. We had one fewer chair than we had people. And I'm not kidding. The officers were so horrible that if you went to the restroom, like half the time it was flooding. And by flooding, I mean like water sheeting down the walls.

38:44And I mean, like you couldn't believe this was actually going on. And I would run around and talk to capital providers, you know, professional financial services firms and say, you know, we're trying to, here's our vision. We're trying to buy companies to build them up and create value. And they'd be like, OK, well, show us the company you want to buy. We'll consider putting capital in. And then I would go to targets, to companies, and say, I'd like to buy you. And they'd be like, OK, great. Show us the capital that you have to buy us. And we'll have a conversation. So this is going on for like six months.

39:13And I'm like, hmm, there is a problem here. Like an empty suitcase and going to a lot of meetings. It became obvious to me that it was an issue when we were at this very fancy private equity firm. And they said the same thing. They were like, you guys are great. You all have Gary Esme. So we'd love it if you would bring us a deal. And we'll put money into the deal. And it was at the end of the day. And we're packing up. And they've left the room. And there was a cleaning person who's emptying the garbage. And I said to my colleagues, I said, I guarantee you that after we leave, someone who works here is going to go to that person and say, incidentally, if you see a really interesting company, why don't you come talk to us about it?

39:50We'll finance it for you. I realized, like, these were empty words. They said it to everyone. They were just looking for free options. So I had to find this lightning in a bottle where there'd be an opportunity to buy a company with third-party capital. And thankfully, one came along. It was called Columbia Music Entertainment. It was a deeply troubled Japanese record company. And I had recorded music experience. The short story is, amazingly enough, we turned it around. Because your idea is to buy, improve, and sell. Correct. You're not holding for a lot of time. We did. It took us a long time.

40:19It took nine years. But it was very difficult because there was recorded music in the early 2000s. It was Japan. It had a 0.5 % market share. It had way too much debt. It had no hits whatsoever. So wait, how do you, like, because you're saying early 2000s, now you're getting the iPod, now you're getting iTunes, you're getting Napster, it was in 99. Why would you even do that? No, it was early 2000s. This all has happened. Yeah, exactly. Yeah, so why would I want to be in the record business? Yes. Yeah, I didn't want to be in the record business. I was like, been there, done that. I had no interest.

40:48And it was a really horrible company. So it came about because one of the capital providers that we spoke to was a company called Ripplewood. And there's a partner there named Jeff Hendren. And Columbia Music had been part of a sort of a two-part company. And essentially, Ripplewood wanted to own the good part. And they wanted to find some person like me to run the bad part. I didn't know that entirely. But OK. I was smart enough to figure that out until it was too late. And so Jeff, who I'd had a couple of meetings with, you know, my company together, called me up and said, here's a perfect deal for you for your first deal.

41:23It's recorded music, which you know. Sure, it's in Japan, and they have 0.5 % market share and altogether too much debt, and probably there are criminals lurking around. But nonetheless, and so I said, well, I know the business because I was in the recorded music business. I said, it's a horrible company. It's a disaster. Like, don't do this deal. And I'm not doing this deal. So he said, OK. And a week later, he calls me and he said, you know what? We're still looking at this business. We really think you ought to look at it seriously with us, because you'd be perfect for it in your first deal.

41:53And I said, OK, listen, it's a public company. So I'll pull all the public docs, and I'll look at them over the weekend. And my partner at the time, Ben Federer, and I spent the weekend pouring through the documents. On Monday, I called Jeff, and I said, it's even worse than I thought. Just run in the other direction. Don't do this deal. It's a disaster. And he said, OK, thank you. Called me a week later. I promise all of this exactly. Like, there's no hyperbole. I sometimes can be accused of hyperbole. This is not one of those moments. I remember I'm in my dining room, and there's like a wall phone, like a long time ago.

42:24This is 01. And he calls. And I pick up, and he says, look, we're going to do this deal. And we really want your firm to take it on and be responsible for building and managing it. And obviously, we've had an upside in the deal. And they would put up the capital. And I said, Jeff, I told you it was really bad. Then I spent a weekend looking at it. It's even worse than I thought. Like, we're passing. You should pass. He said, can I ask you a question? I said, sure. He said, just how busy are you? I laughed, and I was like, you make a very good point. He said, I think you should do this deal. So we did.

43:01It was the hardest deal I've ever done in my life. It was terrible. Terrible. We could literally take five hours, and I could tell you every horrible problem this company had. But I remembered my experience with Rupert, and I became laser focused on just turning it around and getting to the finish line, no matter what it took. Because I realized correctly that if someone gave me$300 million to take over a company and I failed, that would be my last deal. And that's true. That's not dramatic. That's true. No one's giving you more money after that. So we turned it around, remarkably enough, and got about a 22 % IRR in the recorded music business in the early 2000s on Hurt.

43:42That's insane. And this is the first deal of - That was the first EMC deal. That's incredible. And that's how we began to generate income to build up a team, which I reinvested and reinvested and build an enterprise and buy more companies. So take me to take two. All right. So it's 07. We started raising our own capital in 07 and 08. So it's the very end of our being was at that time called a fundless sponsor. Now, today, they call it an independent sponsor because it sounds much nicer than fundless. But I promise you, we were fundless. So even though we'd done six deals at that point, we had very little capital, a very tiny balance sheet.

44:18I'd become, quote, friendly with Carl Icahn. I put it in quotes because he is the man who said, on Wall Street, if you want a friend, buy a dog. But in any case, I had a relationship with Carl. And the relationship took the form of, and I did this intentionally, was I'd go over and visit with him. He's a lot of fun to spend time with. And I'd bring him ideas. And I brought him an idea initially for something that we couldn't act on, but he could because he did public markets investing. And he said, listen, I just want you to know, I'm happy to listen to your ideas, but I'm not paying you for them.

44:51And I said, yeah, I know. And, you know, I thought to have a relationship with Carl Icons, you never know where it could go. So I bring him ideas, and they were good ideas. And the first one I brought him was actually Reader's Digest. I had a feeling something would happen there. It was underpriced. He bought, I don't know, for him, nothing. He bought like$50 million of stock. It immediately went up. I go over to his office like three months later, and I said, sell your stock. And he made whatever. For him, nothing. But nonetheless, he likes making money. He made like$50 million. bucks. Incidentally, at the end of it, he said, you know, I really, I need to thank you.

45:29He said, I told you it wasn't to pay you. I said, yes, you did. He said, but you know what I'd like to do? I'd like to take you and your wife out for dinner. I said, thank you. That's great. So Wendy and I go for dinner with him and his wife, Gail. He only went to two restaurants in those days, a Japanese, a Chinese restaurant, I forgot the name of, and an Italian restaurant called Il Tonello, which is good food, actually. And Wendy and Gail and I get there early because he tends to work late in the day. And I remember he comes to Il Tinello and they know him very well. And as he's sitting, I see the waiter sort of glide over and put a martini in his hand and it looks sort of one smooth movement, martini in the hand, sits in the chair, drinks the martini, puts the empty glass down.

46:12That was how dinner started. And we have a very nice dinner. And Carl's a good storyteller and he's a lot of fun. But about halfway into the dinner, my wife leans over to me and she said, honey, he doesn't know your name. Anyway, Carl then started calling us because I had a team and he would ask us to research ideas that he had. So we would research ideas. And I remember my partner, Carl Seidhoff, who's still to stay the president of Take Two, got really annoyed. Carl speaks his mind because I was asking them to do like research for Carl Icahn. He's like, he is the richest guy on Wall Street and we're doing spec research for him.

46:49Oh, and incidentally, he has informed us we will never get paid. Like, what are we doing here? I said, you know, I just don't know, but I feel good about this. So one day, Carl calls up and he says, Keith, are you familiar with this video game company called Take-Two Interactive? And I said, I'm really familiar with it, obviously. It's a really messy company. I used to own 20 % of it. Take-Two's in very bad shape. It's failing. It's got very bad management. The chairman had been indicted. It was under investigation. They hadn't filed financial statements. And it wasn't even that cheap, despite all that.

47:19Wait, wait, the chairman is under indictment? Yes. Okay, they're being investigated. Yes. They canceled their annual meeting. Correct. They're not filing financial statements. The company is being investigated by a bunch of different - Four, four entities. Okay, four different entities. Yeah, IRS, SEC, New York DA's office, and FTC. They have how much in revenue? About 700 in revenue and losing loads of money and no debt, thankfully, and about 50 in cash. And we looked at the numbers. They're like, they're going to be bankrupt in six months. That's what's going to happen here. And you're like, great.

47:55No, I'm not great. I said, this is a disaster. And so we wrote a whole memo and we said, stay away from it. No, I wish I could send so forward thinking. So I sent over the memo saying, this is a disaster. Stay away from it. By the way, like, I've done video games. I'm like, no interest. And we were doing other stuff that was more tech-driven that we were doing really well with, really well with. So he calls up like - What was the market cap of the company back then, though? About 700. So it went up 7x from when you had to sell? Because it was 100 million when you were 20%. Okay. Okay. So, you know, it's not great, frankly, in a growth business.

48:28And they had increased the revenue material. They built a business. It was a business, albeit a very bad one. so he calls a month later and he says listen i have a friend who's looking at buying a big steak and take two can you refresh your memo and and do this with a friend this point carl sladoff like loses his mind his head he said all right so this is it was bad before when we were doing free work for carl icon now he's pimping us out to his wall street buddies for free like this is outlandish and i said just you just never know where this can go like you never know so we do the memo which essentially says, once again, it's a mess.

49:00Stay away. Again, not being so far with thinking. I don't know how much time goes by. Carl calls me and he says, listen, this thing, take two, you ever look at this? I was like, yes, I looked at it for you. And then I looked at it for your buddy. And I said, don't do it. He said, yeah, yeah, yeah. That thing, take two. It's really interesting. He said, have you read the bylaws? I said, no, Carl, not read the bylaws. He said, well, you know what you ought to do? Read the bylaws. And he hung up. So Ben read the bylaws And he comes in the next day and says, holy shit, this company has a plain vanilla, unamended Delaware charter.

49:35And in this charter, the right exists that if you have 50.1 % of the shares vote to fire the board, you can take over the company. And because the company was so troubled, the stock had collapsed into about 20 hedge funds' hands. So this was actually mathematically possible. The problem is you can't go run around and solicit people to vote their stock without creating a group, most likely. And this is arcane stuff. And we didn't have any money, so we couldn't buy stock. There's a lot like we could go in the market. And we didn't have the money even to mount a proxy fight, which would be the standard way of going about it.

50:14In those days, a proxy fight would cost$3 million. We didn't have that, particularly because it was totally spec. But under SEC rules, you could solicit up to 10 shareholders. And about 70 % of the stock was in the hands of 10 shareholders. I mean, without triggering any kind of filing requirement. So we put together a deck of what we would do to fix the company. And we go meet the 10 shareholders who are happy to meet with us because you're talking about a position they have in a troubled company. And we start getting commitments of who's going to sign the unanimous, sign the written consent that would give us the company.

50:48That's all you have to do, sign a consent. So we go through this whole process. We've now gotten all 10 that we can get to. We can't go to number 11 through 20 legally. Or you can't publicize it either. You can't market this at all. So it's all done quite quietly. And Ben comes into my office. He said, we got 48%. I was like, OK, it's game over. We're done. And he said, well, let me just think about it. Ben's a very smart guy. He goes home the next day, comes in. Turns out there's another provision in the agreement, in the bylaws. If you show up at the annual meeting and you don't have to put an item on the agenda in advance, which is unheard of, you can just raise your hand at the meeting and say, I want to vote.

51:30And if a majority of the shareholders vote in favor of your slate, you can take over the company at the meeting, which is unheard of, just unheard of. It doesn't exist, but it did exist here. But it's not 51 % of the people who show at the meeting. It's 51 % of the votes in the meeting, but you have to be there physically. You cannot vote by proxy because remember, we didn't file a proxy. And we can't solicit anyone. But what we did do was go back to those 10 people and say, look, do you want to form a group with us now so we can actually talk and reach an agreement, show up at the annual meeting, vote for us.

52:06And we think we can win that way. Even though we only had 48 % because we knew not 100 % of the shares would show at the meeting. So that's what we plan to do. And we get a lot of support, we think, until it's very close to the they had scheduled a meeting. We form a group, we now announce it, we indicate to the company that we're doing this weeks before the meeting. The company, not a professionally managed company to say the least, not a good board to say the least. They really didn't even know what to make of this. They'd never seen it before. They didn't understand it. They had bad counsel.

52:41They just have no idea what to do. So we're like, we have 48%. We think that's pretty good. If 75 % of the shares are at the meeting, we're probably good. Until we find out that these hedge funds had loaned out their stock to short sellers, as one does. And if you do that, you can't vote the shares. And we can't solicit anyone, remember. We've solicited our 10. So I said to Ben, so what percent do we have? He said, you're not going to like this, 22%. And I was like, hmm. So we don't have to disclose that. We had our prior disclosure about the group, which was at 48%. And we go to the meeting, physically go to the meeting.

53:23And at this point, there's been a journal article because no one's seen this before. And there's like television cameras out front. And we're at the meeting, walking into the meeting in a hotel. And we'd hired the two top proxy solicitors just to protect us. And we'd been smart about the people we hired. And we spent a lot of money for us on fees because we had to. We go to the meeting. And before it starts, a guy waves across the room. And I go over and say, super friendly. He said, hey, I haven't seen you since law school. It's great. I went to law school. He said, it's great to see you. This is so interesting.

53:58How are you doing? How's your family? And we talked for like five minutes. I go back and I said to my proxy solicitors, who is that guy? And they said, he's Fidelity. Now, Fidelity was a larger shareholder, but they had declined to participate in our group. So we had no idea where they would vote. And Fidelity doesn't typically support anything hostile. They typically support management. So I looked at my solicitors and I said, we just won. So the company had a new general counsel. We had a room in the hotel. The company had a room in the hotel. Oh, incidentally, the CEO of the company declined to attend the meeting.

54:35That gives you a sense of what we were dealing with here. This is the Thursday, by the way. And the general counsel comes into the meeting room that we're in, and he says, well, we don't have the final vote, but we have a provisional vote. You have 88%. He said, so will you accept that, or do you want us to keep counting? I said, we'll accept that. And the next morning, Friday morning, I walked into the company and walked into the corner office and became chairman of the company. That was what year? That was 07. And you're still running it? I'm chairman, now I'm CEO. Ben was the CEO from 7 to 11, then he decided to leave and I became the CEO.

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56:22Learn how they can help your business by going to deal.com forward slash Senra. That is deal.com forward slash Senra. So now you come in, you went from writing this memo to Carl, I kind of like stay away from this to we just took over the company. What was your plan? The plan was there was only one good property, which was GTA, which was in development and was soon to be released, we thought ended up getting delayed. And everything else was total mess except the NBA franchise, which was really tiny. It was making a tiny amount of money. Everything else was losing money. So our plan was meaningfully to cut costs, run a rational company, be friendly to creative talent, diversify the product pipeline, and build an entertainment company.

57:01Did I hear correctly that you cut something like$40 to$50 million a year? Yeah, we cut about$40 million. Explain how you did this. Well, we have an approach. When you're doing turnarounds, you have to cut costs. But our approach is a little different, which is we don't want to show up and fire people. It's a great way to build ill will. Also, you don't know anything when you show up. And so you might fire the wrong people. And also, who knows, maybe you need everyone. Like, you just don't know. But badly run companies, oh, we have a rule. We only do turnarounds if we're the first team in. Like, if someone tried and failed, we don't do it.

57:32You know why? We're not so smart. Smart people all do the same things. So if someone came in before us to do a turnaround and they failed, guess what? They probably did all the stuff that we would end up doing. They still failed. That's not for us. But we were the first team in. If you're the first team in, the first thing we look at is third-party expenses. Every company, particularly big companies, has deals with third parties. You know, I don't know. This was the days where you put disks and cartridges into boxes. So we had a printing deal. We had a cardboard deal. We had a pressing deal for our disks.

58:05And we do a top 10 vendor survey. So all the top 10 vendors and how much we spend with all. Then we call them all up and negotiate them down. And the reason we do that is, number one, you immediately save money. Number two, you don't scare or upset the team. Number three, you begin to create credibility with the team because the team's like, wow, they just saved all this money and no one got fired. Like, that's pretty good. We also don't do things like, you know, put in new expense policies. Like, that is a great way to alienate everyone. Or let's say, David, let me see your expense report. Why did you have lunch, you know, at McDonald's on Tuesday with, you know, Mike?

58:41Like, why? Like, that's a great way to alienate David. And if David has another option, he's going to leave the next day. So we don't do that either. But our top 10 vendor approach saves a lot of money. And then, you know, about three to six months in, when we know, you know, what's going on, then we have to right size the overhead. And most instances, of course, you know, you have, sadly, you have to cut some headcount. Yeah, especially at a company like this. How much money was GTA making back then? When GTA released, the company would have a meaningful profit, like 100 or so a year. But it only released every four years.

59:12So they lost money the rest of the time. Okay, so what was your plan for that? make other hit titles. This goes back to your insight. Because I don't even know if we were explicit about this enough, but you wanted, when you were like a kid, you're like, I want to run a movie studio, right? Yeah. And then 20 years into your career, you're like, no, I want to run a movie studio in 1926, not 1987 or whatever it was. Right, exactly, and here we are. So then you took that idea and you're like, we're going to build a movie studio. And how are we going to do it? We're going to try to be the most creative, the most innovative, and the most efficient company in the business, which was the same rubric I used at every entertainment company ever ran.

59:45When I told that story, because Take Two is public, I had to tell the story. I remember investors saying, how does that plan differ from your plan when you were at Fox? I said, it doesn't. It's the same plan. It's the entertainment business. And we have found that that rubric, which we use to this day, if you're honest and if you're true to the rubric, if your decision-making supports the rubric, it tends to work. You take over the company and the market you have 700 million, whatever. Today it's 30 billion, whatever. 35-ish. That's an insane run, by the way. That's absolutely incredible. Thank you.

1:00:16Great team. So can you explain the ideas that you're putting into place? Like, was anybody even thinking about taking ideas from building movie studios in the 1920s to video games in the early 2000s? No, that isn't what people thought. What people thought about there was making a great video game. That's what they had to think about. No, I meant you. Was I thinking about it? Oh, yeah. Like any other people doing? Oh, doing? I was doing what? Yeah, like you were applying this idea. No, but I mean, I'm not sure that that idea informed what we did day to day. And there were some great executives who built great companies, EA and Activision, among others.

1:00:51And certainly, I don't feel like I had any kind of monopoly on figuring this out. And it took us a long time to turn the company around. And we had some meaningful missteps. And we have not created more value than anyone else in the business. I would argue that, I mean, for pure play, probably Bobby Kotak has with Activision. So what were these missteps? I mean, they're daily. I mean, I'm probably making one right now. No, but what were the big ones back in the very beginning? Because you were a much more precarious position back then. In the beginning, we didn't make too many mistakes. I mean, how could you?

1:01:25Like, when you're on the floor, there's nowhere to fall. This is a terrible company, terribly run. Every decision they made was horrible. I mean, no, no. It was very easy to make sound decisions. Yeah, this is something I thought that was interesting I heard you say where, you know, your pitch to talent was, well, one, you, I think anybody that's successful has some form of ego, but you're willing to like put yours aside. And you've said some stuff where like in entertainment business, the only people that matter, or you're like, I don't matter. It's the people that make the hits that matter. Yeah.

1:01:55Which is like a very interesting thing to say. What's the added benefit of being true? Yeah. You can replace people like me. Yeah, you can't replace the hit maker. So, but what's fascinating to me is your pitch to them is just like, I'm just going to run a rational organization. I want you, you've used the word rational organization, I think at least once in this conversation, I've heard you say it before too. It's like, but the pitch is we're just not going to do any crazy shit. Yeah. Over a long period of time, that is an edge. Can you talk about that? That was a sort of a nice to have. The must have was we are going to give you the resources, creative and financial, to pursue your passion.

1:02:30We're not going to interfere creatively. we want you to make the best video games on earth. That was the pitch. And we mean it. And we will support you through thick and thin to do so, more than any other company. Oh, and by the way, then we'll run a rational business organization. No one's going to scream at you. You're not going to find out that someone's getting indicted. We're not going to get sideways with the FTC. And, you know, it'll be like a real grown-up company. And then over time, I couldn't promise this right away, but I had to promise it. I said, we'll also have a solid balance sheet so that when we fail, inevitably you fail in the entertainment business.

1:03:06We can live to play another day. That took us a few years. Because these super talented people also tend to be like highly disagreeable, somewhat erratic. Like, and I just find it interesting that you kind of balance their, you know, you say you're not talented, which obviously your talents are different. You're very talented. But I think you mean like a creative way, like you're not the one that can create the video games. Not in the least. How do you deal with these very disagreeable, like, you know, talented geniuses? I love them. I'm serious. Okay. You got to say more about that. I mean, you have to sincerely care about other people to be an effective leader.

1:03:43I sincerely care about my colleagues. Genuinely. And I don't love every attribute of every one of them. And I don't love every conversation we have. But they don't love every attribute of me. I just did a 360. I found that out. Not that it came as a surprise. But we care about one another. And I want the best for them and for the organization. And I treat everyone with respect. And I demand that everyone do the same thing. There's no yelling at the company. There's no bad behavior. If you engage in bad behavior, you've got to leave. So one of our competitors at one point had 500 sexual harassment claims at their company.

1:04:22From one guy? No, no. Unfortunately, it was broadly distributed. You know, and we don't have, you know, we've had obviously a few things here and there, but we don't have claims like that. We treat people with respect. People can come as they are. We don't care about your ethnic background, your religious background, your orientation, your lifestyle, the color of your hair. where just do great work, seek excellence, and be kind to others. And by the way, I've had plenty of hard conversations, like super hard conversations. And you said it earlier, and I think I learned this with Barry Diller. I still take it personally.

1:05:01It's not personal. Like we have a business. I never say the word that executives use. Like we're a big family here. We're not a big family here. This is an enterprise. My family's at home. So we don't have all the angst around being a family. However, we are an enterprise that treats people with respect. And if someone is off sides with me and they misbehave, like I don't see myself as so important that you can't do that. I don't feel the need to like teach everyone all the time. I had to learn the hard way, like the delete key is there for a reason. I had one creative person who isn't with us any longer because it just, it did get to be too much and the value delivered wasn't worth it, to say the least.

1:05:45But he used to send the most outlandish and unpleasant emails. And I remember saying to someone, I don't know, maybe a board member, I said, this is really tough because the lack of decorum is so outlandish that at some point he's going to do or say something where I just have no choice but to fire him. And then I realized, wait a second, I always have a choice. You know what the choice is? Delete. Right now. I just started deleting his emails. I would see the first. Oh, I thought you meant delete him as a person. No, delete his emails. I was like, how can I be offended if I delete them? I just deleted them.

1:06:16Without reading them? Absolutely. If I read them, they'd upset me. Eventually he had to go because it was just too bad. But I put up with it for a long time. I don't know. I find this very interesting that like just doing, like being completely rational over a long period of time can actually give you an edge in business. Well, in the entertainment business, particularly. I think in all, I mean, this is something Munger and Buffett, like you mentioned Buffett earlier, I'm obsessed with him. And that was Munger's whole thing. It's just like, we're just able to be rational over long periods of time.

1:06:43Yeah. We don't engage in magical thinking, which is hard not to do in the entertainment business. Magical thinking is because I want it, it's going to happen. Right. Magical thinking is, oh, I don't know, someone's going to see this podcast and they're going to call me up and say, you know, we need to give you$10 billion to do X. Like that's magical. thing. That's very likely going to happen. Let me know. I'll give you a call. I'll give you 10%. That's magical. That's better what Brad Jacobs gave me. Brad Jacobs, episode three, we all go to his house. This guy's laughing. He's like, I love David.

1:07:16He goes, I raised$750 million out of his audience and I had to pay him a fee. And he like slapped his knee. And I was like, that's not funny. But I got dinner with Carl. There you go. You got dinner and you found out he didn't even know your name. And then he put you to work. So the starting point is not like we run a rational organization. The starting point is we will support your creative activities through thick and thin. And that gets tested. And you know, when it gets tested at the worst possible time. And so I like to say, culture like character is tested in the breach. You're not tested when things are going well.

1:07:50Great, we just delivered a hit. We're making all this money. This is awesome. Like have a celebration. That's not a test. The test is when someone comes into your office and this happened to me and we had not turned around the company yet. We had very limited capital and we were developing a game and it was about to be released two months later, which is to say it's done and we'd spent a lot of money. And the head of the division came into my office and said, look, we just don't think this is good enough and we think we screwed up and the art style is not appropriate and it's not differentiated, so we want to remake the game.

1:08:21I was like, what does that mean? And this is a long time ago, so slightly different. He said, it means$50 million of incremental dev costs, a lot of money to us. and another year. And it was on a release schedule, which we announced. And I was like, I dug in. I mean, I don't give like knee-jerk answers. I dug in and did my homework. In the end of it, I supported the decision. And that title became Borderlands. Had we not done that, Borderlands wouldn't have been a hit. Yeah, that's a huge game. And that was a non-obvious decision. And I'm pretty much going to assure you, no one else in the business would have done it.

1:08:57Why? Because it was insane. They would have said, the game is done. Put out the game, move on to the next thing. I'm not spending 50 million bucks to remake the goddamn thing in another art style, and I have no evidence that one will work either. So you just trusted the intuition of the talent? I had to. That's the story. Be the most creative, be the most innovative, be the most efficient. I hired the most creative people. I said, you have to pursue your passions. We will support you. They came and said, this is our assessment. This is our passion. Are you going to support us? And I said, yes.

1:09:29The timeline's slipping because you're sitting on the most valuable media property in the world. And everybody online is just like, when's GTA 6 coming out? Yeah. Like, how do you deal with this? How do you deal with the timelines? It's just like the answer to that question is, I don't know, right? Well, no, no. November 19th, I do know. Oh, okay. No, it's been announced. But this has been pushed back? I think twice. For like how many years? I think we're about 18 months behind the original date. Okay. Not much more than that. Is it the most successful video game of all time? I think so. But it depends on how you count.

1:10:02Okay. From just revenue? I think if you counted every, like Mario Kart and Call of Duty and a bunch of others, it's not entirely clear. But I think in terms of the value of the IP, most people believe it's the most valuable entertainment IP ever created. But people could argue about that. And you don't disclose the revenue for GTA V, correct? Not the total revenue. It's a lot.

1:10:24the reason people keep playing is because it's constantly updated and it's really great and the most recent content pack was awesome and honestly like the social element to like catch up you can actually talk exactly connect and play together and yeah it's amazing that people don't realize that you know online games are highly social experiences yeah especially when you see this with like kids now with like roblox and everything else like it's everything my mom is 90 she plays she plays bridge online. With Buffett? Sorry? With Buffett? Warren Buffett. I never asked her. Somehow. I doubt that. She's good though.

1:10:55And she has bridge friends who she's never met in person. And she gets around. She's mobile, but she doesn't get around the way she used to. And so this is an enhancement of her life. It's a social life and it's something she's good at and loves doing. And she's 90. So this is an industry that speaks to little kids and people, you know. Gaming is enduring. I mean, we played that since the dawn of humanity, figured out games play with each other. There's something you said earlier that I want to pull out from your book. You said, I don't believe in magical thinking. And I don't think visualization is magical thinking, but you do talk about in your book being very, very particular.

1:11:35The note I left myself when I got to this section of the book is that the universe rewards the specific ask and punishes the vague wish. And your point was. And that does sound a little magical, but you have to dig into. That was my note based on like my interpretation of what you're saying. And you're talking about this idea of like creative visualization, which, again, like people think is like some willy foo-foo thing. I've read 415 now biographies of history of success entrepreneurs. I've kept every single note, every single highlight, every single transcript of anything I've done for that project I've been doing for a decade in this giant searchable database.

1:12:10Visualization comes up all the time. And these are not willy-foo-foo people. And I love what you said about why it might be effective. You said, I'm pretty sure it works because the method requires one to concentrate hard, exclusively, and frequently on what one wants. Can you say a little bit about that? Sure. I mean, I think having not done as much research as you, but having read a billion biographies, I was very focused growing up on success, sort of traditional success, but also political success. And I tried to sort of drill it down to like, what is the factor that is most common among highly successful people?

1:12:44And the only thing I could come up with was they knew what they wanted. And it's not because you know what you want, like Napoleon Hill, you know, write it on your mirror, like I want a million dollars on Thursday. It's because I wanted to build a diversified collection of media communications and entertainment assets supercharged by technology starting in 01. And I've been laser focused on it ever since, which means I make choices that are in service of that. So here's magical thinking is, I want to do that. But you know what? It's a very nice day out there. I'm going to the beach today, tomorrow, and the next day.

1:13:18You just told me, like, you're a reasonably successful guy, I think. You just told me you work seven days a week. I have three jobs. I work really hard. Why? Because I have a set of goals and I'm focused on achieving those goals. Now, there's still no guarantee. There's still no guarantee. But by knowing what you want and working in service of what you want, you are much more likely to get what you want than if you don't know what you want or work in service of that thing. That's the truth. And when I started ZMC, I thought, I want to build, I don't know, a$20 billion company that looks like this.

1:13:52And it was out of the blue. And it wasn't like I ran around and was talking to people as I was endlessly and vainly trying to raise capital or find companies that they were saying, this is awesome. You're doing great. Like, who's better than you? People are like, this is a crazy idea. This is crazy. But I looked at it and said, I don't think it's so crazy. I think it's possible. And even if I fall short, I'll probably get closer than if I don't try. And I was OK with that. And I've said this, and I said it publicly, like it took us, I think after 10 years, I was speaking at MIT. I remember I wanted to build a$20 billion company.

1:14:26And one of the students said, how big is your company now? And I said, well, if you take everything together, I don't know, it's about a billion dollar company. And he said, are you deeply disappointed? And I said, well, I really appreciated the question. I said, look, it isn't what I set out to do yet. But you know what? It's directionally correct. and I'm not stopping. And if this is as good as it gets, at least I tried. And, you know, we made a little progress. We did okay. Well, today our company taken as a whole, and it depends on our market cap, we call it a$40 billion company. It kind of exceeded our goals and we're not done yet.

1:15:03But we wouldn't have done that if we didn't know what we were trying to achieve. So today, Take-Two has this, and I advocate this for every enterprise. The mission of Take-Two is to be the number one entertainment company on earth. That's a pretty bold idea. but everyone understands it. The strategy to get there is be the most creative, be the most innovative, be the most efficient. Remember I said that earlier. And the culture in which we work is one of seeking excellence, working together as a team and being kind. Remember that from before there are 14 ,000 people that take two. There's not one person who can't tell you that it's simple.

1:15:41It's straightforward. It has the added benefit of being true. This is why I asked you before we story recording, like if you mind, if I do an episode on your book for my other podcast, I, again, I want to read this because I think it's really important. And, you know, people have asked me before, it's like, what's the most important thing you've learned from this, this crazy, like decade long study of history, success and careers you've done. I was like, if I had to put into one word, it'd be focus. It's like, they are just unbelievably, almost like a different species in the term of, in terms of how they can focus.

1:16:05I want to read that part I just read. It says, I'm pretty sure it works because the method requires one to concentrate hard exclusively and frequently on what one wants. And then you end this chapter with another great sentence. The most important thing you can do to achieve the success you desire is to discover your ambition, narrow its scope with as great a degree of specificity as possible, and blazon it on your consciousness and revisit it daily. And that is visualization. It's just not like magical visualization. I was on the phone with a Zoom call with one of my colleagues because I'm reachable by everyone, everyone.

1:16:43If people email me or text me or Slack me, I respond. And I had been doing a town hall in our office in Austin, and this woman Slacked me afterwards, brand new colleague, and said, can I have a chat with you about my career? And I said, sure. And we were chatting, and she was really impressive. I was quite taken with her. At the end of the call, she said, what should I do to succeed around her? I said, well, you need to know what you want, and then you need to show up on Monday and think about how you're going to create more value than you cost. And then on Friday, think about, did I create more value than I cost?

1:17:16Because if you're here for a year and you get paid$100 plus$25 in benefits and you generated$10 in value for this enterprise, one of two things will happen. Either you're going to lose your job or this company will fail. If you want to succeed and you want the company to succeed, you got to create more value than what you cost. And I said, so think about that. Because she'd already decided what she wanted. This was not about, she knew what she wanted. She wants to be CEO. It's great. Terrific. And then I said, and so, you know, and then come to work. Don't have political exchanges. Put a smile on your face.

1:17:53Say yes. You know, you're going to be fine. Are you surprised? So first of all, I've heard you say this and you're like this to me because when we were like at lunch and I was like, hey, do you have like a team I need to go through to like schedule the podcast? You're like, no, we're going to do it together. Like just text me and like you respond. Are you surprised how few people take you up on this? The fact that you will respond to emails or to messages? No. Here's what surprises me. And this part I don't get. So I spend like 20 to 25 % of my time mentoring, coaching people. Which I want to talk about.

1:18:22Yeah. Using the tools in the book. And as you saw in the book, like some of them are exercises, It's like you have to do the work to get the benefit. And so someone will reach out to me. And while I'm easy to get to, like you still have to do some homework. And I don't schedule. Maybe I schedule. I like having a assistant who schedules me. So there's a bit of a process to have a meeting with me. It's not like, hey, come on in tomorrow at 9 o 'clock. And I am amazed. Like people will come in with a specific ask for something that would affect their life. And we spend time on it. We talk about it.

1:18:55And maybe I assign them one of the exercises in the book. I usually do. And I would say about half the time, they never follow up. And that to me is kind of astonishing. And I don't think it's because I'm a horrible person or I'm scary or something. I think there are people who believe if I can just get into a room with that really successful person, they can just wave a magic wand and I will have success. Sort of my point earlier, someone's going to listen to the podcast and I'm going to win the lottery. And it doesn't work that way. One of the things I understood about starting ZMC, look, I've been around the block.

1:19:26I don't think I have an enemy in the business. I mean, I know you probably know this from your homework. Like I know everyone and I like everyone. And as well, most people like me. And I think candidly, I have a very good reputation. Nonetheless, I think people confuse that with somehow like having a shortcut. So I had the attributes I just described. Lots of people wanted to help me when I started ZMC. You know the conclusion I arrived at was no one can. They would love to. I had all kinds of goodwill. What can they do for me? I had to run out. I had to find the deals. I had to go see Carl Icon.

1:20:02I had to hire a team. I had to pay the team out of my pocket. I had to, you know, manage the team, you know. Think of the story you told earlier when you were recruited to 20th Century Fox. I have a maxim that appears in these biographies of history against entrepreneurs. It's like opportunity handled well leads to more opportunity. Right. You had to handle the opportunity at Verstron. How do I say the company name? Vestron. Vestron first for this guy like hey I need some help now and the whole thing is like that's why it's like whatever this is again from Buffett and Munger they say they believe in like Carlisle's prescription which is like do the best possible job on the opportunity you have in front of you and that will then you don't have to worry about the opportunity it will unlock future opportunities or it may not but it's the best that you can do what else would you be doing anyways you can't do anything better but you said earlier when you went on my friend Patrick's podcast I think you mentioned this book you're like how few people this book is not for sale you can't buy it but you you give it out and even that where you know hundreds of thousands of people heard that and you're like 50 people asked for it yeah that's insane to me i think it's tied to what we were talking about earlier it's like you have this edge that you can just run a rational organization over a long period of time you also i think understand that time carries most of the weight you know think about the compounding you've done in the last 25 years from 750 million to 40 billion you know and it's just like i'm gonna apply this rational I'm in a good business.

1:21:21There's technology tailwinds here. And I'm going to apply this rational organization working with the best people possible. And the score, kind of the score takes care of itself over multiple decades. You said you want to do 20 billion. Well, you've doubled that and you're probably keep going on to that. That's the goal. Let's go back to the talent and how you serve the talent. Because when I hear the conversation we had, the book I've read and the interviews I've heard of you, it's like, you seem to be like very comfortable, almost like you're in like the service business. Is that a way that you think about this or no?

1:21:49Yeah, I think a good CEO needs to serve his or her team. And no work gets done in the CEO's office. So what do you really do? You agree on the mission, you set the strategy, you agree on the culture, and then you drive daily execution. But you're driving that daily execution through other people. And how do you do that? You have to motivate them. You have to obviously stay informed so you know what's happening. And then you have to motivate them. The very rare occasion that a problem can't get solved below my level, you've got to solve the problem. On the rare occasion that a decision about an approach or capital allocation, you know, isn't obvious or is above someone's approval level, it comes to me.

1:22:30You know, I'm not writing memos. I'm not, you know, I'm not doing Excel spreadsheets. And are you adapting your style to each individual talent? Of course. Okay, so this is - Well, I mean, I'm true to who I am, but of course. Okay. So we had the same experience where like some of these books are great and the titles are terrible. Like How to Win Friends and Influence People. It sounds like How to Be the Most Popular Boy in the Class. It's just like so many people told me about that book. I didn't read it because like the title is terrible. But you almost saved me the need. I already read the book.

1:23:02But you almost saved me the need to read How to Win Friends and Influence People. And your whole thing is just like take a sincere interest with an emphasis on the word sincere in other people. Right. That's the story of the book. That is really a book on sales and leadership. Yeah. And friendship. So explain how you apply that inside of your own work. Well, I mean, I just did a 360 and, you know, there was criticism in it, to be clear. But one of the positive attributes, and there were plenty of those too that were noted, was when he sits with you, he really, really cares about you. He sits with anyone on any level in the organization.

1:23:37He responds to everyone. He's kind to everyone. And you think you're the only person in the room when he's talking to you. You ask me, like, how do you deal with, like, difficult creative personalities? I say, because I love them. I care about them. I genuinely care about them. And I care about my executive team. I care about everyone who works at the business. But frankly, I care. You're going to find this hard to believe. And it sounds, I really don't mean it sounds self-serving. I think it's like table stakes of humanity. I care about the person behind the counter at Starbucks enough to say hello, ask them how their day is going, and interact with them a bit if they're not busy, you know, pouring coffee, which sometimes they are, to see if maybe I can brighten their day a little bit.

1:24:17Like, why wouldn't I? There's a great story in Dale Carnegie's book where he tells a story of, I had an idea. I went into the post office, and I wanted to brighten the day of the guy behind the counter. and he's struggling with what I can say because I really was, this is an exercise for him. He gets to the front of the counter and the post man behind the counter apparently had a great head of hair. And so Dale Carney says, you have a great head of hair. I wish I had a head of hair like that. And the guy said, oh, thank you because I'm kind of proud of my hair. And they had a little interchange.

1:24:51And Dale's telling the story to a friend and the friend says, well, Dale, what did you get out of that? And he said, what did I get out of it? Are we so small minded that we need to get something out of every interaction? How about that I improve that person's day and it improved my day? How about that? So if you're taking that position as a starting point, look, if you're taking a position like, I'm here doing this podcast, here's my goal. My goal is to look awesome in your podcast. Well, that's a very bad approach. My goal is when I show up to have some engagement like this and I've had plenty, how can I be of service to David and to his audience?

1:25:27That's what I'm thinking. One of my favorite quotes ever, it comes from Henry Ford. He says, money comes naturally as a result of service. And I think part of what we're trying to do here is like this whole show is like essentially a love letter to capitalism. And the reason I say that - You also said, it's apocryphal, not clear. Whether you think you can or you can't, you're right. That's attributed to him. It's not clear it was him. But we used that line at DMC for the first couple of years because it was so hard to do, we did. It's in your book. Yeah. That line is in - I haven't read the book in a while.

1:25:57Well, I read it this past week. But no, to the degree that we do have any kind of influence is like, you know, I'm the son of a Cuban immigrant. I grew up meeting people that literally risked their lives to flee communism. I knew from the time I was probably nine years old, something's weird about this country I've been born into, something special here. And so what we're trying to do is like, there's also like, you know, corruption and crony capitalism. It's just like, we're trying to celebrate people that like, they build products to make other people's lives better. They build wealth for themselves, their family, their employees.

1:26:28They create jobs. We had John Matkey on this podcast, founder of Whole Foods. One of the stories he told is one of my favorite stories. Just like because of the fact that we went public early and there were stock options for our employees, like these are grocers. These are normal, just they just want to live a normal life. And they're able to send their kid to college because of the stock. They're able to buy a home because of the stock. Like why wouldn't that? John started that with an idea with his girlfriend and two other co-founders. Like these people should be celebrated. And I think the reason I thought that came to mind when we're talking right now is, but not celebrated because you want to do it for yourself.

1:27:01It's in service of other people. Well, I mean, listen, I'm not a saint. And I definitely have my own personal ambitions, including material ambitions. And they were palpable and they were meaningful. And the truth is that I've evolved over time. So when I started out, I didn't read How to Win Friends and Influence People for the first few years. I was at Fox when I read it. You dodged the book for a while. I did. I saw it like you. I was like, good. And I mean, I think I was the guy who I was insecure. And my approach to a situation was, how am I coming across? How do I look? What do people think about me?

1:27:36What do you think? Let's talk about me. And I could mask it behind sort of a humble exterior. Frankly, you just can't fake humility. And I was anxious all the time as a result. And I nearly failed at Fox as a result of this. And it was a book that changed my life. I turned it upside down, like immediately turned my life upside down. What was the different position you were taking when you were in your early 30s at Fox? It was like, basically, I'm trying to work through you to accomplish what my ambitions were, as opposed to actually figuring out. I have the answer. I'm the smartest guy in the room.

1:28:14I got the sharp suit on. I can speak grammatically. I got a couple of Harvard degrees. We're just going to do it my way. I mean, I wasn't like that because I wasn't a shithead. But that was the subtext. Yeah. And I shifted that to how can I be of service to you? How can I be of service? And how can I get to know you? Have you seen anybody have long-term success that doesn't have a service mindset? Sure. They're all different styles at work. And one of the things that I've learned is it isn't one size fits all. And my approach is not for everyone. And by the way, I'm not the most successful guy on earth.

1:28:46Not even close. So this is not by way, and I hope it didn't come across this way, like, this is my approach and everyone should follow my approach. To your point, you've interviewed loads of people and you've read hundreds of books. It's not the same approach. There are some common elements, of course. But Elon Musk's approach to business is diametrically different than mine. He does not have be kind. It's one of the company values. I just did an episode with the author of the new book. And one of the things that in that book that he wrote on Elon, in Elon's own words, was that camaraderie is dangerous.

1:29:19So I don't know him. It is clear that we have very different approaches. And last time I checked, he's the richest guy on earth and I'm not. So I'm not here to criticize him or his approach. It's his journey. But I'm aware of the fact that his style, though completely different than mine, is a very successful style. And in the video game business, I would argue that we run our business differently than anyone else. And there are other successful enterprises, plenty of them. And by the way, thank God there are, because if we were one of one, I'd be nervous about our future. Even more broadly in the entertainment business, there are styles that win that are not my style.

1:29:50Barry Diller's style, for example, the Socratic method that he pursues, which can be brutal. It really can. I mean, I can't use it. It is brutal at times. That's just not my approach. I just don't do it that way. But it works for him. We're different people. and I think there are times when I have missed things because I take too soft an approach to, I think I can sometimes support people who are on the team longer than I should, more than I should. There are times when I've kicked the can down the road and shouldn't have done that, although that I really learned from. But I don't have the view that my approach is the only one or the best one.

1:30:32It just happens to be my approach And it does, generally speaking, work. And it's worked for my life in that, you know, not the richest guy on earth, but I'm not going to miss a meal. And I haven't built the biggest. You're not going to miss a meal for several lifetimes. Let's be clear. And, you know, I haven't built the biggest business, but I built a business I'm proud of. Build a giant business. You don't think in those terms, though, right? I reject the notion that one size fits all in almost anything in life. Oh, so there's something I want to transition to and ask you about because you have all this experience in media.

1:31:05So like, and obviously I'm kind of in that business, even though I don't know if I think about it. So I want some personal advice to you. But this is such an important thing about one size doesn't fit all that Daniel Eck, the founder of Spotify, and I are working on this project to try to outline all the different founder archetypes. We might even like commission a book on this because it's so important. And it became a lot of conversations where he was just like, he was essentially playing a role. He's like, everybody, all young entrepreneurs, technology entrepreneurs in the early 20s, they said like, oh, like, what's my options?

1:31:34I had to be like Steve Jobs and the way he communicates. And then now I have to be like Elon. And so he's like, I was literally like playing a role that wasn't me. And he says he wasted so many years of his life not realizing that there isn't one type. And it is dependent on who you are and your own style. You just said something that was interesting. I had somebody that works with you email me. I'm curious. people think take two is in the video game business. I think you think of it, you're just in the media business. The entertainment business, yeah. Okay, what's the difference between the media business and the entertainment business?

1:32:08Well, media is just a broader rubric. That could include advertising, for example, would be media business. Why not describe it? Like, what's the difference between entertainment and video games then? Video games just sounds a bit narrow and we provide an entertainment experience expressed through video games. And maybe that's a difference that doesn't make a difference but I think it does. Okay, so explain like how you think about this. You could think of a video game as like a mobile video game you spend seven minutes on, or you could think of it as Grand Theft Auto 6 that you spend hundreds of hours on.

1:32:37They're very different experiences. They're both entertainment experiences. I think to call them both video game experiences maybe understates the diversity of experience. Do you think all the different forms of entertainment are kind of like, they compete with one another, but they kind of like, they're all kind of collapsing. Do you look at it like that or no? Like the distinction between a video game and watching something else or listening to a podcast or interacting with AI, to me, is just all entertainment and information. Yeah. I mean, I look at the media day broadly and according to Activate a Consultancy, the media day is like 13 hours in the US and anything that fits within the media day can compete or coexist.

1:33:16So yes, in that way, but no, at the end of the day, like, Like, you know, playing a video game is still a very different experience than watching a linear television show or a movie. It just is. This goes back to your insight that, I don't even think we talked about this, but when you thought about new media, you're like, the most valuable new media is not going to be passive. It's going to be interactive, I think, is the term you used. And that's the case with video games because it's the biggest entertainment business, and it's growing more rapidly than any other. And the size, it's bigger than all the other forms combined?

1:33:45Yeah. At the software level, yeah. That's an insane, like, and it's growing faster. Absolutely. Yeah, we're roughly double the rate. Is there any other thing that you would be interested in pursuing in media besides video games? Sure, I'm open-minded. I think that in the fullness of time, one could ask, would it make sense, for example, for Take-Two to diversify into other forms of entertainment? I can assure you we would not diversify backwards into backward-looking, legacy, declining businesses. But there are other exciting entertainment businesses, and there'll be more in the future. And live entertainment is a really interesting space, for example, that's growing.

1:34:22How is Take-Two using AI right now? We have hundreds of projects going on, and we already have promulgated enterprise software. So we have enterprise versions of chat, GPT, and Claude that are available to everyone to use, that are fully licensed and paid for. And then we have about 200 projects going on to try to create more productivity and to give people the tools they need to do their jobs, whether they're creative jobs or executive jobs, more effectively, more efficiently, with more innovation. Let's go back to that story where you're like, well, we need a 20th century foxhole. We need a business guy.

1:35:00Let's grab this guy. So when you realized you needed an AI person, did you create an entire role? How was the structure? No, we have a new CTO, Dave Klein, and it all reports to Dave because it's technology. It sits within the technology world. And no, I don't, you know, not in any way to minimize the effect of all things AI. But first of all, the words mean different things to different people. And we're a technology company that makes entertainment. We always have been. So this is not new to us. And engaging with technology aggressively to create better products, to market them better, and to run our business better is what we do.

1:35:35You know, innovation and efficiency. So it fits well within our system. And we've pushed really, really hard to be as ambitious as possible. And even so, I'd say we're getting internal criticism and that we're not moving fast enough. But we're trying to. So what is your overall viewpoint on AI, though? Again, that's sort of like saying, how do you feel about motherhood and apple pie? I like both. All things technology that can create efficiency, I'm all in on. But you're doubtful of the creative ability of AI? No, I'm not doubtful of anything. I'm totally open-minded. But do I believe that, remember what AI is, despite the fact that there are people in Silicon Valley who don't want you to believe this, is big data sets, lots of compute, and a large language model mushed together.

1:36:20That's what they are. So data sets by their very nature are backward looking. Creativity by its very nature is forward looking. Creativity is informed by data. You're informed by those hundreds of books that you read. And when you have a podcast, you're informed by the ones you've listened to. How could you not be? But if yours was just a really high quality clone of Patrick's, who would watch yours? And the thesis that, wow, with AI, we can more efficiently create a completely derivative property, like derivative properties don't work. So that's where the thread has been lost, that AI so far is really great at asset creation, but hit creation is an asset creation.

1:37:03Asset creation is a necessary but insufficient condition for hit creation. So I would love to say that AI will make it easier, quicker, and better to make hits, because who would benefit more than we? We're in the business already. We own IP, right? That you know. So you don't have to create new IP, which is really, really hard to do with or without AI. Like, this table goes to Hollywood, getting someone to buy that video game, that's incredibly hard. Getting them to buy GTA 6, not so hard by comparison.

1:37:35So it's not that I take at all lightly the potential benefits of new technology. To the contrary. No, I think your entire career has been an example of that. It's the story of my career. It's just that when our stock goes down by 50 points, because people are like, anyone can make a video game. That was the thesis. With AI, anyone can make a video game. It's like, anyone can make a video game last week. Like anyone can make a video game five years ago. The technology is readily available. It's commoditized. You know how many mobile games get put out a year? Thousands. You know how many hits are made in a year?

1:38:05Zero to five. You know who makes them? Thank you very much. We do. That's just true. And that's not, I mean, that's just true. It's like, you don't need this new technology to create assets that are competitive. That already exists. It will be quicker to do it. But speed isn't the issue. If I told you, David, with this technology, you can create something that looks exactly like GTA, and it's going to take three years, not 30 seconds, you'll be like, I'll spend three years on it. It's worth it. And that exists. You can, in three years, technology exists prior to AI to clone GTA, but it won't be GTA.

1:38:45It'll be a clone of GTA. Clones don't sell. All hits are by their very nature, unexpected. That's the most important thing to take away. Things that are data-driven in their entirety can't be unexpected. But that doesn't mean AI isn't super helpful. Perfect place to end. Charles, thanks for the time. This was awesome. Thanks for having me. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work.

1:39:19Most of the guests you hear on this show first found me through Founders. I'll see you next time.