Episode 486: Mark Cuban: Why Most Entrepreneurs Hire Wrong (And Go Broke)

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1:55Entrepreneurs tend to think, okay, I'm hiring this amazing marketing person and he or she is going to know what to do. And then they tell that to their investors because that's typically why they're hiring a marketing person. And they say, oh, this person's amazing. Our next quarter is going to be great, then it's not. Then they go to the next marketing person. Then they're in this hamster wheel again, and they're screwed. It's also relying on other people. Well, yes. And that's the whole thing, right? You've got to be able to solve the problems yourself. Right. Self-reliant. Now, at some point, your business gets bigger, and you have to learn how to do a lot of other things.

2:27When you go to five people, it's one thing. You go to 10 or 15, it's another challenge as you learn how to manage and deal with people. But at the same time, if you're not great at your core competency, how are you going to train those people? How are you going to know what the goals are for the organization and how to communicate to them how to do what you need them to do? But every entrepreneur goes through that terror. I've gone through it. It's like, oh, shit. Can I do this? Or am I smart enough or good enough or talented enough to do these? The self-doubt. Yeah. I mean, we all have imposter syndrome.

3:03I still have imposter syndrome. No way. Oh, hell yeah. You walk into a circumstance, I'm like, and there's named people that names anybody would recognize. Yeah. And I'm like, what the fuck am I doing here? No way. Oh, yeah. All the time. Yeah. Who would you be intimidated by? I'm not going to get named names, but yeah, for sure. But there are people that you want. Yeah, for sure. Yeah, for sure. Yeah. Really? And it's not like an Elon Musk or whatever. No, I know. It's just somebody who has domain knowledge. Like if I'm sitting in a meeting and we're discussing artificial intelligence. Yeah. Like, I understand artificial intelligence, and I've done a lot of reading, so I have a good grasp of it.

3:37But this person has created neural networks and models that, you know, have a billion parameters, things that I wouldn't even know how to start to do. Yeah. I can understand the conversation. Right. The concept. Right. Yeah. But I'm not going to know operationally how to execute on it. Right. That's just scary. It is scary. Because you're afraid that, okay, did I read enough, right? Because they're living this day to day. Yeah. And I'm never going to catch up and know the stadium. Sitting down with the Mavs, you know, with Jason Kidd there, he's forgot more about basketball than I'll ever know.

4:08Right. And so you just, you know, it just - But you're his boss, technically, so maybe he can teach you on the side. I don't know. Yeah, but, you know, I can read and learn and add the value that I add, you know, for analytics, et cetera, whatever it may be. But yeah, everybody's going to have that self-doubt. The question is, what business are you in? Because a lot of companies don't even know. Yeah. Like when I got to the NBA, they thought they were in the basketball business. I know. But you changed that whole team around. Well, it's not just a team, right? The NBA. Yeah. The NBA used to think they marketed basketball.

4:39Oh, that's true. Yeah. But, you know, I sat there with him. I said, okay, name the last game you went to and tell me what the score was. Nobody remembers unless it was just a big game. Right. Right. Name your favorite donk or shot. No one remembers anyone. Right. Now tell me who you were with. And everybody knows. Everyone remembers that. You remember the first game you went to with your parents, your aunt, your uncle, whatever. Yeah. You're going to remember. The emotional part. Yeah. Because that's why you go. Because it's the one place you can scream and yell. Yeah. And you do. Yeah. And I do, right?

5:09But where else? You're not going to see me yell here or there or whatever. But when you go to a game, you feel that energy and everybody knows they're part of the entertainment, right? Because you're yelling defense, defense. And that ball's in the air for a game winning or losing shot. and everybody's holding their breath. And if it goes through, you're high-fiving and hugging people you've never seen before in your life. That's what makes going to a game special, feeling that energy. And they thought it was about, oh, who has the prettiest jump shot? Yeah, you're right. It's all about the emotional part.

5:42It's all about the emotional attachment because that's what sports are. And that's what makes sports different than any other business. And I had to explain that to them. It was just like, when Apple, which has the biggest market cap in the world, has a great quarter, they don't throw parades in Cupertino. No, they do not. Right? When the Lakers or Mavericks or whoever win a championship, the whole city goes insane. It's so true. You know, that's unique to sports. And you have to recognize what business are you in. Basketball is the platform, but emotion and entertainment is what we sell. So how did you turn it?

6:14So you bought the Mavericks, by the way. I mean, by the way, great investment for you, right? Yeah, it's really good. What, 285? You bought like 2.5 billion. That's a lot more than that. How much now is it worth? Like four? I'm not going to sell. Oh, why would you? I mean, yeah, you're not going to sell. But I'm just curious. It turned out to be undervalued. Yeah. I mean, that's pretty amazing though. It is. It's crazy. And that's, you bought it purely on just passion for basketball. I mean, I still play pickup, you know, so that tells you, you know, I can go out before the game starts and just get up shots, you know, on my own court, you know, my own arena.

6:48That must be so, can you, would you ever, when you were a kid, Did you ever think that that was ever going to happen? Oh, hell no. Never in my wildest dreams had ever crossed my mind. It really didn't cross my mind until after I sold my company and had enough money. And it was like, oh shit. Yeah, now I can put my money where my mouth is. But you were smart. Can you explain why? How did you even think? Because when Yahoo bought broadcast.com, you got it in stock, right? Yes. And you hedged it or something? I hedged it, yeah. What does that even mean to get it into cash? So it was a public, you know, when we got sold to Yahoo, we were a public company who paid us in stock.

7:24And because Yahoo also was a public company, you could sell options on it. So I could sell calls, which gave up part of the upside, but allowed me to buy something called puts, which protected my downside. And so I sold calls, bought puts, that's called a hedge. And I did it for my entire position. And when the whole, you know, bubble burst for the dot com era, you know, I actually made more money. And so, yeah, it's been called one of the top 10 trades of all time. Of all time. Yeah. Because that like changed your entire life. Well, of course. I mean, because there were a lot of people who made a lot of money in stock and on paper and just saw it all disappear.

7:59If it wasn't for that, like that little decision point. Yeah. You wouldn't know who I am. I would never know who you were. Like you sold the first one for 6 million or something like, which is not nothing. Which is great for 29, 30 year old. Right. But it's not, you know, it's not billions of dollars. And then like you bought this company, you bought the Mavericks from Ross. How did that, Ross Perot? I was, yeah, he didn't care about basketball. It was a real estate deal for him. But I was a season ticket holder and somebody connected me and like in less than a month, I bought it. And - I'm like a jury bus.

8:27I'm sure you can see it at Showtime. Yep. That's amazing. And so do you go to all the games? Unless my kids have something. Unless, well, don't the kids also want to go to, well, now they're probably, are they as obsessed with it as you are? My son is becoming more and more so. My daughter, my middle daughter likes it. My oldest daughter, it's just - To make her less. Yeah, just social. Yeah. Yeah, just for the social part. Yeah. That's amazing. So basically right now it's the basketball and it's cost plus. Those are the two biggies. Well, cost plus. Basketball, you know, except for free agency, basketball kind of runs itself.

8:58Yeah. Were you at Summer League just now? Yeah. Yeah. So I was there, yeah. And I do it because I love it, right? Right. Well, yeah. Why do people go anyway? Like your level? Like are they just going to see the players and all that stuff? Yeah, it just depends. For me, I just like basketball. Yeah. Yeah, you're a different story. But yeah, you've got to recruit and you've got to identify talent and all that kind of stuff. It's just like hiring programmers or hiring videographers or hiring producers or whatever. But you just love it so much. Yeah. No, I enjoy it. Yeah. Yeah. Wow. So what was the other – okay, wait, I lost what I was going to say to you.

9:27Hold on. I think that's basically – well, where were we before I talked about the summer league, the thing? The – about the – No, not the other thing too. What was the other thing I was going to ask you? Just about entrepreneurial stuff. Just entrepreneurial stuff. I don't even remember what I was going to say. Do you have anything else you want to say? What were we talking about? Entrepreneur's failure. I mean. Habits. Sure. Sure. So for the. This is Amir. Yeah. I know. I know. I saw Shark Tank. I got to put that over there. Yeah, exactly. What was it? You talked about like these companies not raising or not advertising and making margin.

10:02That's what you talk about a lot is like, what's your margin? Forget about the top line. um obviously with like facebook and instagram there's been an opportunity for companies to scale using ads well it depends on how much money you have so the question about you know spending money um for advertising whether it's search or other things it depends what type of company you are um you know i think for most entrepreneurial companies particularly startups that you have to know what sells your product now if you're just trying to get scale and you're selling it direct to consumer, you're probably going to have to advertise unless you find a better way to do it virally.

10:41But you have to know what sells your product. Like with Alyssa's - I love that you always use her - Yeah, it's easy, right? Cost plus drugs, it's easy. It's easy. Right? We have another company, Wild Earth, which is vegan dog food. It's harder because you have to explain it. Yeah. The education piece is - Yeah, so there's an education piece. But the challenge now is because of the changes Apple made to privacy, getting a return on advertising spend, ROAS, is much more difficult. And so you're having to become a lot more innovative in how you sell your products. In streaming products, whatever it is, you've got to find what the most cost-effective way to go is.

11:20Now, part of the challenge is that learning process. So I'm never a fan of spending a boatload. I'm a fan of test a lot. Test and retest, test and learn, because it always evolves. And spending for search engine advertising or Facebook ads, whatever it may be, YouTube, you're competing with everybody in your category. And that's getting the price higher and it's getting the returns lower in a lot of respects. So you've got to understand what the compelling aspect is for people to say yes. What is the path of least resistance for you getting someone to say yes? And you don't want to go all in. And the other thing I'll say for startups is I'm not a fan of brand advertising.

12:03You're not. No, not even a little bit. You earn your brand and your brand captures an identity based off of your execution, right? What do you mean to your customers? That is your brand. Let the customers define your brand. If you're trying to show pretty pictures and people running on the beach and all this, and you're kind of virtue signaling to your business, that's typically a waste of money. Now, unless you're Pepsi or Coke or whatever. And then the other thing that I see a lot of companies make mistakes in, they hire a marketing or finance, whatever, and they just do MBA 101. Yeah. Right?

12:46This is what I learned in finance or entrepreneurship or my MBA classes. So this must be what you do. Right. No. Right? Right. Context matters a lot. You know, what's your competition doing? How do you differentiate yourself? And you always want to focus on your differentiation. Business is about selling two things, how you're different and why you're the path of least resistance. So that people have a reason to buy. And maybe you can encapsulate that is how do you reduce your customer stress? How about community now? I feel like everybody's doing two different things. One is they're trying to build a community, right?

13:20The other is attaching to a cause. Yeah. Right. Having a mission is all good. Having a mission. Right. And, you know, community typically with NFTs, you see that, right? That's what I was like avoiding. Yeah, that's right. But with community, again, it's got to be organic. And it's great to set up a Discord server or set up a Facebook group and have somebody that works for you or you even, I try to do it myself a lot of cases, be responsive to everybody because you get to learn about your customers. Right. So community is great, right? Right. And it should be part of every business. To me, that's part of the blocking and tackling.

13:54You know, it's like answering your emails or having an info email address. Right. That's so, okay. So that's actually, I mean, that's interesting because I found that's the hardest part for companies to do is build that community, right? Yeah. It takes time, but it takes happy customers because it can work against you too. Yeah. Yeah. Because if your customers are not happy, you're toast. Yeah. Because that community is just going to turn on you so fast. 100%, especially now, you know.

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15:50So, okay, this is the area. I'm not great at this area, so I'll fake it a little bit here. But the whole cryptocurrency, Bitcoin, blockchain, blah, blah, blah, NFTs. So the whole, by the way, I had a lot of money in Voyager also. Yeah, me too. A lot. So is it gone now? No, I don't think it's gone, no. It's not? You might not get all of it back. So if you had US dollars, USD, you'll get it all back. I will? Yes. So not USDC, but USD. There's two different things. USD was stored in a bank account. USDC is still considered crypto. Oh, really? Yeah. Okay. Because that's like, I was mortified. Do you know which one you have?

16:27I don't know. I got to check now. Because I just found out, obviously, a couple days ago about this. I was mortified. Yeah, it's brutal. Yeah, it's hard. The whole thing, because also it was such hype. It was so hype. They made a mistake. I mean, it's like, look, I've been investing a long time and I've seen companies make mistakes for things that were supposed to be riskless. Yeah. Yeah, that's exactly right. I mean, nothing's ever riskless, right? But close enough. Yeah. I mean, I remember I had a bank call me. I had a lot of money in the bank. And fortunately, they called me and said, this bank's about to go under.

16:57And so you better pull your money out now. And so I was fortunate. but unfortunately voyager did a deal with this company called 3ac three arrows capital and that it looked good on paper but the company basically lied about their finances and um wow yeah because voyager is a public company in toronto i actually even owned stock i bought stock you know so did i buy i'm canadian too so from toronto yeah so i bought stock in the company on the toronto exchange thinking, okay, but when 3AC went bankrupt, it just had that contagion. But in reading all the filings, basically what Voyager is saying is, the USD is cash in the bank at their bank, right?

17:43Right. And so if you have that, you'll get 100 % back. The USDC and crypto, it really depends on how much they're able to collect from, um, from. The stat one. Yeah. What's that? I have the other one, not the one I'm going to get back. Yeah. The USDC. Yeah. And I had a lot of USDC there too. Yeah. Um, cause it was making eight and a half percent. It was making exactly. Yeah. And so, and this is why I was making eight and a half percent. Yeah, exactly. And so hopefully, you know, if what they say in their filing is accurate and I have no reason to believe it's not and the judge that's dealing with the bankruptcy agrees then they'll be able to put um consumer accounts first to get you know probably 60 70 percent of the crypto back oh really yeah and then what they're what they've said in their filings and in public that they're going to try to do is for the other 30 or 40 percent they're because they're bankrupt the old stock that i own is worth is worthless right right they'll try to in the new company they'll recreate it and give stock and tokens to those people to hopefully, if it turns out to be worth anything, make up the Delta.

18:50Wow. So what do you think? I mean, obviously you're like very involved, you invest in a lot of this stuff. People like me and probably a lot of more, I would say a majority of the population don't really understand this whole idea. But then what happens is we get like not pressure, kind of pressure. No, it's pressured. Yeah, it's like anything else. Everybody's making money. Everyone's telling me there's crazy monopoly money. So then I feel like I'm missing out. And then I put a bunch of money in. You got to fight that feeling. Tell me about it. Now you know. Yeah. And so the question is, is there a way to educate people properly?

19:23Because you just got to do the work. I mean, I knew you were going to say that, but there's just no shortcuts. I wish there were. This is one area that you're hard. So one difference between, look, stocks are the same way. Right? So if you look at your stock portfolio, if you have any tech stocks at all, it's gotten crushed. Everything's getting crushed. Yeah. And it's gotten crushed as much as Bitcoin or Ethereum, right? So you always have to ask yourself, is the company a good company? You know, or is the value? Because part of the problem with the tech stocks is their valuations went too high because interest rates were so low.

19:51And so people had nowhere else to put their money. So they put it into crypto and they put it into high flyer tech stocks and other things, right? Right. And when interest rates have been going up over the last few months, it's like, okay, well, I can earn two or three or 4%. Why am I going to take the risk on crypto or on these stocks? So I'll just yank it out. And Amazon has fallen, what, 50%, 60%, 70%. Netflix, 70 % or 80%. Yeah, everything has gotten destroyed. Even Apple has gone down 30-some percent. And so there's no way you can predict all of that. It just doesn't matter who you are. Stocks don't always just go up, even though it feels like it.

20:26And it's the same with crypto. But for me, with crypto, there's two types of crypto tokens. One is store value, which is really only Bitcoin. And that's kind of like gold. There's all kinds of narratives that say, well, if you hold gold when there's heavy inflation, the price of gold will go up. Price of gold has gone down during all this inflation. And so that's bullshit, but it's a narrative that gets people to buy. And it's the same with Bitcoin. There's only 21 million going to be made. So if there's inflation, you don't have to worry about it. That hasn't worked either. But the reality is those store values are just about supply and demand.

21:02If there's more people buying than selling, the price goes up. Right, exactly. If there's more people selling than buying, the price goes down. Now, the good news with both gold and Bitcoin is most people just hold them and wait it out. That's one kind of crypto. And the other kind are just tokens and, you know, like Ethereum and - You have Doge, doesn't you guys use Dogecoin? Dogecoin, yeah. Dogecoin is just fun. Dogecoin is like the on-ramp for crypto. Oh, okay, okay. Yeah. You can use it to buy stuff and everything. You can go to the Mavs store and buy tickets and buy whatever. But like what I've said, it's a better lottery ticket than a lottery ticket.

21:39Because once you scratch it, if you don't win on your lottery ticket, it's over. At least with Dogecoin, it's got a chance still to go. That has a chance. So how about NFTs? What's with this NFT? It's the same thing. You told me about Chris. What's his face? Chris Brown. Chris Brown. Do you see this? He has like 100 million followers, 120 million followers on social media. He made an NFT. The singer? Yeah. Okay. And he sold like, what, they made how many of these? Oh, yeah. I mean, it's like art, right? No, it's, yeah, no, I understand what it is, but I feel like everybody and their dog now is like doing one and having one.

22:15Yeah, but it's just like, you know, anybody who collected baseball cards. So is it the same? Same thing. Yeah, only a digital version of a collectible. That's it. And so if I buy, and if you want to see my NFTs, go to lazy.com slash mcubin. Okay. That's another company I started, right? I was going to ask you about this lazy one also. What is that? It's just a way you just go to lazy.com, set up an account, connect your wallets, and it's an easy way to put in your Instagram profile or at the bottom of an email, check out my NFTs, lazy.com slash mcubin. Okay. I'm going to check them out. Yeah. So if you have NFTs in your wallet, it's a really easy thing to do.