Keeping Up With Rapid Change, With Investor Thomas Tull

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1:33There's no safe like SimpliSafe. From Entrepreneur Media, this is Problem Solvers, a show in which entrepreneurs do what entrepreneurs do best, solve unexpected problems in their business. We were completely wrong. And I'm just like, it's not selling. It was like, we have to start from scratch. I'm Jason Pfeiffer, the editor-in-chief of Entrepreneur Magazine.

1:59When I talk casually with very, very successful people, I often ask them this question. I say, what is the most important piece of advice that you give to founders who you work with? And I hear a whole range of answers to that, but I had never heard something quite the way that Thomas Tull answered that question. What Thomas Tull said to me was, be prepared for velocity. That is his advice to founders. Be prepared for velocity. Things happen so quickly now. And your company can get very big quickly and it can fail very quickly. And you're going to have to make a lot of choices with imperfect information.

2:46This, as you may have guessed, is Thomas Tull. And I just think that the more that you understand the velocity of today's changes, decision-making, the implications, I think you have to be prepared for that. And who is Thomas Tull, if you don't know his name? Well, he's a guy who certainly took that advice about embracing velocity, being prepared for it. Well, he ran a chain of laundromats after college. Then he went on to found a film studio. You might have heard of that, Legendary Entertainment. It made massive hits, including the Dark Knight trilogy and the Hangover series. And that work, along with finding success as a tech and VC investor, made him a billionaire.

3:26After leaving Legendary in 2017, he continued his investing career, supporting Pinterest, Oculus Rift, Sandbox AQ, and more through his company, Tulco, and as chairman of the United States Innovative Technology Fund. He's also part owner of the Pittsburgh Steelers and the New York Yankees. So, you know, a guy who's had some success. And the way that Tull sees it, running a business has always been hard, but the landscape, it was once more predictable. You could see what was gonna happen. You were gonna be able to pace yourself. Now, no longer. Everything is changing. It's changing all the time.

4:01The technology is changing. The ecosystem is changing. The economy is changing. Global political systems are changing. And although there's no way to predict exactly what's gonna happen, you better be prepared to shift along with the world. That is his point. Today on Problem Solvers, I'm going to share with you the conversation that I had with Thomas, because when he said prepare for velocity, be prepared for velocity, we were actually just chatting. But I said, Thomas, we have to sit in front of some microphones and we have to talk about this because this is worth every entrepreneur hearing.

4:37An edited version of the conversation appears in the January 2024 issue of the magazine. But right here on Problem Solvers, you're going to hear the whole thing coming up right after this break. Are you looking to buy a franchise? Which is to say, are you looking to buy a business that comes with a built-in support system and operate a brand that many people already know and trust so that you can be your own boss without the burden of starting from scratch? Well, if so, we have 500 of the best opportunities for you to choose from. I am excited to tell you about the 2024 edition of our annual Franchise 500 list.

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6:03And to start, I told Thomas this. I said, look, this is the kind of advice that I think everybody says that they understand. Yeah, yeah, yeah, of course. Yeah, I got to move fast. I got to be prepared to move fast. Like who's going to say I don't understand that? But there's a difference between intellectually understanding it and understanding what it really means when you're in it. When you are in a situation that is ever changing. when you can never rest? And I asked him, well, how do you even start to adjust for that? Well, look, I think that the best I can tell is you have to have a combination of your elemental value system, what you fundamentally believe in and want to act upon.

6:48Then you have to have pliability to be able to change and bend where applicable. and you're going to have to do those things at speed. So how can you be prepared? I would say that know your organization, know yourself, understand what threat could appear. And if you can say, okay, what would sink the ship here? You know, what would that look like and where could it come from? And then everybody uses the anti-fragile thing. I actually think that's a really smart notion of how can you make sure that you're in a position to survive things that in some ways you couldn't see coming. I don't think there's a manual for this.

7:31Like, oh, just write a mission statement about how to prepare for fly. I don't think you can do that or it's right. But I think it's also a mindset. You're able to see over the horizon a little bit, not get complacent, be sufficiently paranoid, and also be incredibly intellectually honest about people these days. We talk about moats and all these other things. I think that's getting harder and harder to pull off. So I think it's more of a mindset than it is, I'm taking these steps or I read this book and that's just sort of what I'm seeing these days. Do you advise entrepreneurs to task specific people with this?

8:13I'm thinking about the way you started that answer, which was to talk about culture, to develop a culture in which you're taking very seriously the velocity and perhaps precariousness of your position in the world. And so when you build a culture in which people are thinking about that, I guess what they're really thinking about is challenging assumptions of being comfortable bringing up uncomfortable thoughts to their leadership and saying, you know, hey, I see us in a vulnerable state here. But as I and maybe you talk to entrepreneurs about things like AI, a question that I, and again, probably you hear a lot is like, well, there's only so much time in the day.

8:55There's only so many things I can worry about. There's only so many things I can test. There's only so many things I can explore. How do I actually structure this? How do I actually figure out who is supposed to care about this? Because I can't spend all my time doing this. What do you think people should do as they think about building a company that can be reactive and how they actually structure either themselves or just build the culture so that they can be? Well, that's part of the resiliency question. I think in the culture that you have, if your workforce is just sort of showing up, punching the clock and saying, I'm here until the next thing shows up versus a real shared mission that starts with hyper honesty and communication.

9:38so it's not just because I said so, but it's everybody understands what's at stake, why you're doing what you're doing, and the ability to say things that are controversial, splashed upon, whatever you want to call it. I think all those things are either inherent in your culture or you're building a culture of, hey, don't say that upstairs because that could impact bonus, that could impact my promotion. And that's up to leadership to foster that kind of environment where people are able to use their aptitude and to be incredibly honest about their observations and feel like they're not going to get attacked as long as they've got data to back it up.

10:23So again, I don't think there's any calculus for this as much as there is creating an environment for that to not be okay, but to thrive. I'd be curious, because we've been talking at the abstract level, if you could take some of what you just said there and think back on your own experience as a leader in many different avenues. Is there something that you have found that works for you to inspire that kind of confidence in others so that they feel comfortable speaking up? They feel comfortable sharing hard truths? Well, I just think communicating it in organizations that I've led, that's one of the things I think would almost become like a joke around the office is the only thing that's going to get you out of here fast is not speaking up, not speaking your mind.

11:09And look, you're paid for your talent, your aptitude, your opinions. Let's hope they're well-informed. But at the end of the day, there's enough people taking shots at you and competing on the outside, that if you have to worry about that on the inside, it just makes things that much harder. So I think communicating often and also showing people that you really mean it, right? If you're just going to say the lips are, you know, everybody says, oh, I have an open door policy or whatever, but what happens when someone walks through that door? What happens when in sort of the group meeting or whatever it is, someone says, hey, I see this completely different, and completely differently.

11:49And how are they treated? Is there any action follow-up or is there just like, thanks for sharing? Again, it's really hard, I think, to say, oh, do A, B, and C and that'll work for you. Every situation is different. All human interaction is kind of dynamic and different, but it all to me starts with trust. When leadership says those things, do I trust they mean? And how do you earn that and put enough in the bank so that people say, yeah, I don't have to watch my back here. As you were saying that, I was thinking about the leaders that I've worked with and when I did or did not feel comfortable sharing things they didn't want to hear.

12:33And I think saying this more to float as a theory, just to hear you respond to, I think that perhaps as I think back on it now, the single most visible, important moment that trains me to either speak my mind or not is, does this person become defensive? Like, I, I, when I think back, right, like you can immediately think of the leaders who you, who you worked with, who, when you push back on something, they showed some kind of defensiveness and, you know, you don't want to work with a defensive leader because it's never going to work well for you. So you just change paths and you become the person who just doesn't trigger the defensiveness versus people who are not defensive, where then you realize you can kind of go anywhere with them.

13:14There's something about defensiveness that I think leaders may not recognize in themselves until maybe it's too late. I don't know. What do you think? Yeah, look, there's a difference, I think, between contextualizing a decision that may be in the inner circle or whatever you want to call it. It's like, look, that's a really good point. But let me tell you what was on the other side of that. These are tough choices. To me, that's very different than being defensive, not self-reflective, and immediately shutting that person down. Most of that stuff comes from some kernel in your mind that you know you screwed up or you're wrong.

13:50Because if you're confident about it and you're like, oh, okay, let me tell you why we made that choice. Or let me tell you why I actually disagree with that. That's just completely different discourse than shutting somebody down because, hey, you pointed out a flaw. That makes me feel bad. So I'm going to shut that down. And years ago, I had this podcast, not this one, another one. And it had a silly name and it grew and then it kind of plateaued and I was trying to figure out what was wrong. And I have a friend who has a consultancy. And so he was helping me and interviewed some audience members and discovered that the name was actually really confusing.

14:27And some of the things that we were trying to do to describe the podcast were like turning people off. And anyway, so we had to rebrand the whole thing. The reason I'm telling you this story is because of this piece of advice that he gave me at the end of it, which I have carried with me ever since. And your advice for be prepared for velocity reminds me of it. It's almost as if what he told me is a little subset of that. I'm curious for what you make of it. What he said is that we often enter something thinking, what if this fails? And we're guarding against that. We're looking for every avenue to spot whether or not something fails.

15:02He said, what we may not think about enough is what if this succeeds? Because, okay, what if this succeeds? What if this grows? Am I actually structured for that growth? In the case of my podcast, I had this silly name. It made sense to a small audience who followed us on Twitter, which is where the thing originated. And so for a little bit, it made sense. But the problem was that if this thing succeeds and it actually starts reaching people beyond our Twitter audience, they don't understand it. This name doesn't make any sense. and therefore the whole kind of premise of it falls apart. And there's something interesting in the blind spot of that, isn't there?

15:39Entrepreneurs are by nature optimistic people, but we often spend so much time just thinking about how to guard against failure, which means that we may not spend enough time actually preparing for growth and success. What do you think? I'm reminded an old friend of mine down in Texas, this guy named Red McCombs, who was a business legend, his sort of mantra was expect to win. I met him when I was pretty young and really thought that was an interesting thing to put out there. And I think there's a lot to that because if you don't expect to win, then why are you doing what you're doing? Why are you spending this limited time that we have on this whole journey?

16:21And I think that when companies do grow quickly and don't think about the implications of growing quickly and being successful, that may stop them from ever continuing to reach their potential. One of the things that I tell younger companies that I invest in is part of the backbone of that, I think, is to overinvest in HR. In this day and age, for a number of nuanced reasons, making sure your HR department is buttoned up, properly staffed, does things the right way, I think sets the conditions, at least in that regard, to be successful. because I find a lot that companies would be like, oh my gosh, we grew so quickly.

17:11Yeah, we don't have those policies and procedures. People kind of feel like they're floating because we never expected, well, HR is not somewhere, in my opinion, that you should skimp or be ill-prepared. So to me, that's one example of how to think about your point. Right. In other words, it's about making sure that you're investing in the places that are going to be most important foundationally when you actually grow. Yeah, because if you don't have a strong foundation, obviously you can come up with all kinds of examples, but I think it is important. Yeah. Let's talk a little bit about something that feels like the central point of acceleration in business today, which is AI, something I know you know very well.

17:57Let me pose the question. Let me start by posing the question to you that keeps getting posed to me, which is from small business owners, from medium-sized business owners. If I don't invest in this now, if I don't spend time trying to figure this out now, am I going to be left behind? My answer to them is always, do it if you can, but this is still very early days. But what do you think people should be doing as they're thinking about how to engage with this technology, which is clearly transformative, but in ways that we may not quite understand yet? Well, I think context is everything. And it depends on the industry.

18:31It depends on your individual company. One of the thought experiments I think you need to run is, how much would I care if my competitor was able to implement this and what impact would it have on our competition, on my business, et cetera? If the answer is, I'm running a lemonade stand and I don't think it's going to help me that much, well, that's one answer. If it's other areas of business that your answer is, it would severely hinder slash put me out of business, then I would think very seriously about it. I do believe over the next decade that artificial intelligence and adjacent technologies and software, et cetera, is going to get in every corner of our economy.

19:15And I think those that are not sufficiently trained, digitally fluent, and able to take advantage of this, I think it's going to be a real problem. But at the same time, we started with the word velocity. I think it depends on each company or sector when that day of reckoning comes. But I do think that the implications of artificial intelligence and other technologies that are kind of around the corner are going to be incredibly impactful. I am curious what you would say the next step is for someone who says, is my customer, am I concerned that my competition is using this? If the answer is yes, where do they begin?

20:02Because here's what I see in the landscape. Here's what everyone sees in the landscape is a bazillion experiments. And every SaaS platform they're using is now talking about how they've integrated AI in some way. And then there are the questions of whether or not, you know, you should somehow figure out how to custom build something or hire an AI expert to come in and consult. And I think a lot of people just feel like, I don't know what this, I know that this is going to be useful. I don't exactly know how and where and when. I don't know what it is that I can start optimizing for. Where do people begin?

20:40I think with the basics, what is it that you do in your business? What's worth knowing? What's actionable? What's repeatable? Where are the choke points in your business? And what are the things that if they were automated and or from pattern recognition to smarter, faster decisions, what would the result of that be? And if you can start to work through those answers, whether it's the, hey, if I had a magic wand, but I think you have to start with the basics. What does your business actually do? What's painful about it? and what would change everything if you could do it and then work backwards from there.

21:22If you have a hard time answering those questions, then I guess the answer is either you're not a great candidate for it or you don't have a great grasp on the implications and the possibilities of what technology, these technologies offer. Your point about asking what's painful about your business makes me think about this. I'll tell you a quick story. So I was hired to speak. I do much speaking. I was hired to speak at an annual attorney retreat for a regional law firm. And so I fly out to San Francisco and I'm on stage. I'm talking to a couple hundred lawyers. And then I get to the Q &A session and everyone is asking me about ChatGPT, all the lawyers, which I didn't expect.

22:06And I get off stage afterwards and I go to the CEO and I say, it's really interesting that all of your attorneys are really focused on ChatGPT. And he said, none of them are going to tell you this outright, but I'll tell you why they're all focused on it. Why they're all focused on it is because they're all afraid that chat GPT or something like it is going to make motion writing more efficient. And that's going to mean that their work is faster and lawyers work on billable hours. So they don't like that. They don't want their work to be more efficient. And I said, well, that's fantastic, isn't it?

22:40Right? Like, Not because like anti-lawyer, but because if you think about it, billable hours works for nobody. Everybody hates billable hours. Who likes billable hours as a system for paying their lawyers? It's a terrible system. And I don't think the lawyers like it either. It's just the system that they've operated in. And yet there's nobody has ever been incentivized to come up with a different system because you would just be sticking your neck out. Like why would a law firm try to reinvent the basics of the way that the law firm operates? And so there's never been an incentive to fix a thing that is functionally broken, right?

23:10Like nobody likes it. And now AI is going to force that thing to become functionless, right? Like it is going to break the thing that is already broken. And that enables somebody, some smart person out there to say, ah, why don't I build a new solution for now? And I said that to the CEO of the law firm. And he said, that's exactly right. That's why we just hired a head of AI. And I've become kind of obsessed with, and it hadn't really occurred to me until that conversation with the law firm, but I've become obsessed with this idea of breaking things that are broken. You know, there's like so many things in our work that's broken, that we do anyway, even though they don't really work as well as we would like them to, or as well as our customers would like.

23:54And possibly the thing that AI is going to do above all is it's going to identify those really weak points in the things that we do and force us to rethink them and that the winners may be the ones who rethink them fastest. What do you think of that? Look, I think it's interesting because everybody likes to tell stories about shaking things up in industries and so forth. And there are some things that happen slowly and incrementally because whatever the thing is, is hard, right? We all know that air traffic control is using an antiquated system that's becoming increasingly dangerous, but hey, are we going to shut down the airports for a month so the IT folks can come in and implement the changes?

24:41That's hard. Those are hard things. So whether you're a law firm where there's a lot of repetitive, tedious wordsmithing, whether you're health insurance or in the medical profession where probably wouldn't be accused of being wildly efficient, but to turn the ship quickly in things like that is difficult. So I think that what artificial intelligence does rendered correctly or efficiently is to take today, and I think this will change, take many tasks that don't offer a lot of differentiation or value and to automate. And then we can build on that. Now, the hope is that you're going to have than people being able to spend their time on more important things, on more creative things that create more value.

25:36One of the things I'm absolutely worried about and thinking about is there are many jobs that I worry will become obsolete. And there isn't a human machine interface that says, hey, now one plus one equals 10. We just don't need a person for that anymore. And I think that on Capitol Hill and in corporate America, thinking about those implications and what it's going to mean is really important. Because if you go tell a bunch of folks that, hey, I went to school or I apprenticed for this, I poured myself into it, and then just say, hey, no, thank you, we're good with machines. There are massive implications for that.

26:19And what does that look like? And how can you start to think about it now versus waking up one day and saying, hey, I guess this is a big, giant problem? Yeah, it's really what you've just done there is taken the idea of be prepared for velocity and urged a system-wide adoption of it, right? Is that we don't just have to think about this as an individual, but we have to think of it as what are the broader implications of the things that we're all navigating and accelerating with together? That's right. So Thomas, as a kind of concluding way of thinking about this, let's say somebody's been listening to this and they're thinking things are moving really fast.

27:02I am not sure that I've done the proper audit here on whether or not I'm prepared to win, whether or not I'm really able to move at the speed in which possibly I need to be moving. What would you say is, and you've offered a lot of great advice and questions, but if we could just sort of top it off with a starter thought. What should somebody start with? If somebody's thinking, I need to be prepared for velocity, where's a good place? It's so abstract, but where's a good place for somebody to start thinking as soon as they stop listening to this? Take inventory. Take inventory. And again, in a really, really intellectually honest, self-reflective way.