Strauss Zelnick, Take-Two Interactive

Summary

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Podcast Summary

Episode Overview

Podcast: David Senra
Host: Scicomm Media
Guest: Strauss Zelnick, Chairman & CEO of Take-Two Interactive
Date: May 17, 2026

This episode features an in-depth conversation with Strauss Zelnick, a prolific media executive and investor, best known as Chairman and CEO of Take-Two Interactive (publisher of Grand Theft Auto). Zelnick reflects on his four-decade career, the lessons he’s learned in media and entertainment, his unconventional takeover of Take-Two, philosophies for building world-class creative businesses, and thoughts on technology, talent, and leadership.

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Key Discussion Points & Insights

1. The Unusual Takeover of Take-Two Interactive

• Hostile Takeover "With No Money":
  • Zelnick describes executing a unique, low-capital hostile takeover of Take-Two in 2007 when the company was in crisis.

    "We essentially did a hostile takeover with no money. The reason we did that is we had no money." (B, 00:25)

• Navigating Governance and Proxy Rules:
  • Explains how, after discovering an unusual clause in Take-Two's bylaws, his team collected enough shareholder votes to oust the board and assume control—without a standard proxy fight.

    “This company has a plain vanilla unamended Delaware charter...if you have 50.1% of the shares, vote to fire the board, you can take over the company.” (B, 48:11)

• Transformation Plan:
  • Immediately focused on cost-cutting, rational operations, and empowering creative talent to build a world-class gaming studio.

    "Our plan was to cut costs, run a rational company, be friendly to creative talent, diversify the product pipeline, and build an entertainment company." (B, 56:38)

2. Early Career in Media: Embracing Change and Technology

• Background as a "New Media Guy":
  • Zelnick's early assignments in the 1980s centered around new technologies—first in film and later as an early believer in home entertainment (VHS, DVD, then digital).

    "The insight that probably helped me the most was you always have to embrace new technologies. If you fight against them, you'll be left behind." (B, 04:25)

• Home Entertainment to Video Games:
  • Witnessed and drove shifts from physical to digital media; likens his move from the film industry to video games as seeking the "next movie studio system."

    "What is the moral equivalent of the motion picture business in the 1920s? I thought, it's a video game business." (B, 25:24)

3. Business Philosophies and Management Style

• Rational, Service-Oriented Leadership:
  • Emphasizes running a “rational organization” that prioritizes talent, minimizes egos, and avoids drama.

    “We won’t do anything crazy and we won’t go bankrupt.” (C quoting Zelnick, 30:02)

  • His approach is to "give you the resources...to pursue your passion. We’re not going to interfere creatively." (B, 62:21)
• Obsession with Efficiency and Creative Excellence:
  • Believes in supporting top creative talent with stability, resources, and autonomy, which directly translates to hit generation.

    “We are going to give you the resources, creative and financial to pursue your passion. We're not going to interfere creatively. ... Then we'll run a rational business organization.” (B, 62:21)

• Talent Recognition and Nurturing:
  • Zelnick highlights identifying “the real deal” in creative people and then creating an environment where they thrive.
  • On handling talented but difficult personalities: “I love them...You have to sincerely care about other people to be an effective leader.” (B, 63:31)
• Learning from Mentors:
  • Recalls lessons and culture from working under Barry Diller and Rupert Murdoch at Fox.

    “If you backed down [from Barry], if you didn’t argue, you were done. ... It was about ... arriving at the right conclusion.” (B, 19:00)

  • Describes Diller’s “brutal Socratic method” versus his own more service- and kindness-oriented leadership.

4. Entrepreneurship, Focus, and Opportunity

• Opportunistic Transition Across Media:
  • Zelnick was motivated both by a future-facing vision and pragmatism, moving between sectors to chase where technology and consumer value were heading.
• Resilience and Negative Experiences:
  • Story of BMG’s divestment of their game portfolio—later turning into the first Grand Theft Auto at Take-Two—underscored the need to bet on future technology even in the face of opposition.
  • Balanced approach to risk: “There's two stages in life to be an entrepreneur—before you have any responsibilities and after you have some protection.” (B, 28:29)
• Laser Focus and Visualization:
  • Advocates “creative visualization” not as magical thinking, but as clarity and repeated, specific focus:

    “The most important thing you can do ... 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.” (B, 76:31)

  • Success comes from clarity of purpose and persistence.

5. Company Culture, Values, and Long-Term Strategy

• Empowering Creative Teams:
  • Take-Two’s edge comes from supporting front-line creators and maintaining a culture of high standards, kindness, and resilience.

    “We are an enterprise that treats people with respect. ... Just do great work, seek excellence and be kind to others.” (B, 63:33)

• Running a “Rational Organization”:
  • Avoids micromanagement, fosters motivation, and tolerates mistakes if in pursuit of excellence.
  • “Just being completely rational over a long period of time can actually give you an edge in business.” (A, 66:24)
• No “Magical Thinking”:
  • Critical of hype cycles, believes most value is created by focus, efficiency, and consistent support for talent, not chasing fads.

    "We don't engage in magical thinking, which is hard not to do in the entertainment business." (B, 66:43)

• Not a ‘Family’, but a High-Respect Enterprise:
  • Deliberately rejects the “we are a family” trope, instead focusing on fair treatment and clear expectations.

6. Industry Analysis: Gaming, Technology, and the Future

• Why Video Games Became the World’s Largest Entertainment Industry:
  • Interactive experiences, persistent engagement, and network effects make games far more lucrative and enduring.
  • “The media day is like 13 hours in the US and anything that fits within [it] can compete. But at the end ... playing a video game is a very different experience than watching a TV show.” (B, 93:04)
  • “If you count from revenue ... most people believe [GTA] is the most valuable entertainment IP ever created.” (B, 70:00)
• AI and Content Creation:
  • Enthusiastic about AI’s role in asset creation and efficiency, but highly skeptical that it will create "hit" entertainment, because AI is backward-looking and hits are always unexpected and original.

    “Asset creation is a necessary but insufficient condition for hit creation ... All hits are by their very nature unexpected. Things that are data driven...can’t be unexpected.” (B, 97:41)

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Notable Quotes & Memorable Moments

• On the uniqueness of Take-Two's acquisition:
  “The way we did this deal has never happened before and I’m pretty certain it will never happen again because… we essentially did a hostile takeover with no money.” (B, 00:25)

• On the principle of creative focus:
  “The only thing I could come up with was they [successful people] knew what they wanted.” (B, 72:26)

• On service-based leadership:
  “A good CEO needs to serve his or her team, and no work gets done in the CEO’s office.” (B, 81:49)

• On embracing change:
  “You always have to embrace new technologies. If you fight against them, you’ll be left behind.” (B, 04:25)

• On rationality as an edge:
  “Just being completely rational over a long period of time can actually give you an edge in business.” (A, 66:24)

• On giving creators autonomy:
  “You have to sincerely care about other people to be an effective leader. … I treat everyone with respect and I demand that everyone do the same thing. … If you engage in bad behavior, you gotta leave.” (B, 63:31)

• On AI and unpredictability of hits:
  “All hits are by their very nature unexpected. Things that are data driven in their entirety can’t be unexpected. But that doesn’t mean AI isn’t super helpful.” (B, 97:41)

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Timestamps for Important Segments

• 0:09 — The never-before-told story of Take-Two’s hostile takeover.
• 4:25 — Lessons from the history of electronic entertainment and embracing new technology.
• 26:19 — First leap from film to video games.
• 29:02 — Founding Crystal Dynamics; lessons on risk and entrepreneurship.
• 35:48 — BMG’s video game division, the origin of GTA, and the missed windfall.
• 43:54 — Turning around a failing Japanese record company; launching ZMC.
• 47:05 — Meeting Carl Icahn; how the Take-Two deal started.
• 56:38 — Post-takeover plan: Rationality, cost cutting, and creative support.
• 62:21 — How to attract and serve top creative talent at Take-Two.
• 66:33 — Being rational in entertainment and avoiding “magical thinking.”
• 75:44 — On the importance of focus, visualization, and clarity in ambition.
• 81:49 — The function of a CEO as a servant leader.
• 94:24 — Take-Two’s approach to AI: practical, data-supported, and skeptical about AI replacing creativity.

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Conclusion

Strauss Zelnick’s conversation is a masterclass in media entrepreneurship, organizational leadership, and strategic focus. He threads together historical insight, humility, and shrewd business acumen. Listeners are left with actionable philosophies: Embrace change, focus obsessively on what matters, serve your talent, eliminate drama, and trust in the power of rationality and compounding over time.

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Useful for anyone interested in media, technology, entrepreneurship, or building creative organizations, the episode is filled with practical wisdom and memorable stories straight from the front lines of entertainment’s digital transformation.

Transcript

[A]

Can you run through the how you wound up buying and taking the deal to get Take two Interactive?

[B]

You know, interesting. It's not a story that we've told and part of the reason is stories like this tend to be sort of self serving because it worked out well and not everything works out well. In fact most deals don't happen and deals that do happen don't always work out. But this one did. It's kind of a set of one of one. The way we did this deal has never happened before and I'm pretty certain it will never happen again because we, we essentially did a hostile takeover with no money. The reason we did that is we had no money. So it was really our only choice. But I had a background in the video game business and started ZMC with partners. And the goal of ZMC was to buy in certain instances, turnaround and in all instances build up and create value in companies that stood at the intersection of media and technology. And the idea in 01 when we started the business was that technology would supercharge media and create lots of value and destroy value. And of course that's a story now that's more resonant than ever. I thought in 01 it was pretty obvious, but it was non obvious to the entertainment business.

[A]

I guess we should give some context. By that time you had already spent two decades in the entertainment business about that.

[B]

Yeah. And I've been in every entertainment business there is.

[A]

So why was it obvious to you in 2001 not obvious to other people in the industry then?

[B]

I was the new media guy. So my goal getting out of grad school was to run a movie studio, an old business even when I graduated from grad school. So I got to Columbia Pictures in a very junior job. It was the only job I was offered and by definition the best I could get in the entertainment business. I was responsible for international television distribution which was basically the last stop on the train of distribution of film and television. In those days there weren't many outlets with motion pictures. You went cinemas and then you went to the beginning, the very beginning of home entertainment, the very beginning of pay television, the very beginning of cable television and eventually free television. And my job was to distribute to free television. So I'm sitting around and new media has come along to the entertainment business. In those days, believe it or not, new media was home entertainment at that time was video cassette distribution and paid television.

[A]

And this is in the 80s, what time?

[B]

83.

[A]

Okay, so that's new media in 83.

[B]

So that's new media term still used

[A]

all the time, 50, almost 50 years later, amazingly, yeah.

[B]

So big companies like Columbia Pictures, which made their money in film and television production and distribution and were really old line companies who were just beginning to modernize. I was one of a small cadre of business school grads who'd been recruited into the business, which was atypical for the industry until the early 80s. And so they realized we need a new media guy, like the way today everyone needs an AI guy or AI army. And so they looked around, they're like, who is the least valuable executive at this company that we can put in charge of new media? And that was me. So in addition to my day job, I became responsible for new media, which was the best thing that ever happened to me because I had always been a futurist. My thesis in grad school was a history of the electronic entertainment business from its inception in 1895 until when I graduated in 83. And I tried to stay current since then. So the notion of looking ahead sort of came naturally to me. But now I had to do it for my job. Oh. And I had to deliver revenue in that job as well. So that was my initial exposure to new media. And actually, if you look at my career, it has been the combination of traditional businesses and new businesses driven by technology, which is why this is such an exciting time with all things AI.

[A]

I want to interrupt you in one second. Did you say so you were a futurist by looking back though? Did I just hear you were studying?

[B]

I don't have to be a futurist by looking back.

[A]

So wait, you started back in 1895. What was happening in 1895 when we

[B]

were studying the beginning of electronic entertainment, recorded music, beginning of motion pictures.

[A]

What is the record? The beginning recorded music is phonograph.

[B]

Well, in those days it was a wax cylinder, but you don't really need to know about it. I'll go into it if you want, but it's actually a wax cylinder. It looks like this. You can see them in museums. And that was the beginning of recorded music. That and player pianos.

[A]

I'm more interested in what insights you were deriving from the past and then how you thought it was you were applying them in the 80s.

[B]

So there are many insights, obviously, and we can go into them one after another. But the insight, I guess that spoke to me, that probably helped me the most was you always have to embrace new technologies. If you fight against them, you'll be left behind. Number two, and I've said this in all the companies I've been at. Most human beings are wired to believe that which is going on now will never change. But the actual state of play is exactly what is going on now will change. It will always change. For example, people, whether they like it or not, think today's political environment is what it is. If they like it, it's going to stay forever. If they don't like they're moaning that it will stay forever. But it won't stay forever. It'll change. The economy will change and media and entertainment will change. And because I've always been wired that way, I was able when I started ZMC to make sure. I have an idea. Let's not buy legacy businesses that are under pressure. Remember, this is 01. So it was non obvious. Let's not go into the movie business. It's a terrible business. As a business it's fun creatively, but as a business it's a bad business. Let's not go into deficit network television production. Just a bad economic business. Different today than it was, but it was really bad then. Where you would deficit these shows in hopes of creating enough episodes that you could syndicate them. And if you didn't get there, you had a massive loss. And if you occasionally got there, you had a huge hit. Which is what motivated everyone was the economics looked a lot like winning the lottery. But I don't win the lottery. How about you? But that's not my life experience. But there are many other lessons as well. But the biggest lesson I think is that new things come along and they can grow. Old things in the media and entertainment business take a really long time to die. Sometimes they don't. Sometimes they stay in the business forever. Sometimes they come back.

[A]

What would be an example of that from the 80s where we're at, where we're talking about new media and that's what your focus is.

[B]

Home entertainment, which was basically video cassette distribution, which became DVD distribution, which became digital distribution, which was a tiny market

[A]

at that time that drastically expanded.

[B]

It was just beginning to boom in the early 80s.

[A]

And you were an early believer in that.

[B]

Well, so much so that I left Columbia Pictures to go to the largest independent home entertainment company, Vestron.

[A]

Okay, so tell me about that.

[B]

Well, I've been very fortunate at Columbia Pictures. I figured out how to double the division's revenue in six months, which was good for my boss's career and therefore good for mine. So I became the youngest vice president of Columbia Pictures. And then I was recruited. I got sort of a reputation for like how this guy Figures stuff out. And I was recruited to a company called Vestron, which was then the largest home entertainment company that had ambitions to become a diversified entertainment company, which was also my ambition. Just refreshing conversation from earlier. I wanted to run a movie studio. Vestron wanted to start a movie studio. So I left to go to Vestron, where within, I think about, pardon me, about nine months of arriving, I became president. So I was now president of a public entertainment company. And I was 29. Three years out of school was not my expectation. And then I had this ability to take on the new movie division that hadn't actually made any pictures yet. So it was very early. I didn't start it though. I got there and the team was already there, but I gained responsibility for it and we started making movies.

[A]

Go to the new media part though.

[B]

So the biggest part of Vestron's business was home entertainment distribution, which was video cassette distribution. They would create movies and put them on video cassettes which you would rent in video stores, you may recall. And they would also ultimately make movies and put them through the entire distribution system.

[A]

Would they buy other, Other content made by other people?

[B]

Yeah, that was actually how the business started.

[A]

That was the majority of the business.

[B]

It was, it was the business when I got there until they started their own production.

[A]

And then the idea is, okay, let's,

[B]

we're already going to do this ourself, okay? In the same way that Netflix started as a distribution company and realized how to be in production.

[A]

I've been a subscriber, never churned from Netflix. And when they were just mailing me DVDs, I don't know, 20 years or.

[C]

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[A]

How did you get from new media is, you know, DVDs and home entertainment to oh, wow, I think I'm going to have. I have a religion on video games and I want to like move myself into that industry.

[B]

So I was not a pioneer in the video game business. The video game business started in the late 70s and began to grow in the early 80s. And just by way of background, I was really contrarian about video games because Hollywood had a horrible video game experience, which I'm not sure too many people would remember today. But in 1982 there was a huge hit called ET and Warner Communications, very forward thinking, had purchased Atari, which at that time was a leading video game company. And they made both hardware and software. And software in those days was cartridges. And cartridges were expensive to make and had a long lead time. So before you released something, you had to decide how many you're going to sell and order it all. And if you were right, you did great. And if you're wrong, you had excess inventory. You didn't have just in time inventory with cartridges. It took too long to create. So Warner's has Atari, they're doing well with it and they have E.T. and they're like, we should make an E.T. game. And because they didn't really have a lot of experience in how video games were made, they made the game in five weeks and put it in the box and it was a terrible game. And then they manufactured more games, more cartridges than there were Atari consoles. Not sure what their idea was, but they did. And then it was a disaster. No one bought the game because it was terrible. And there are visuals of the cartridges being plowed into landfill that you can find online today. And the entertainment business is a small business. And everyone was like, oh my God. That nearly tanked Warner Communications. I think they took a write down in 82 of $400 million, which was a lot of money in 82 for Warner Communications. So the rest of the business is like, this is a disaster. Like don't, don't ever get involved with video games. It's terrible business. Okay, roll the clock forward. I've been at Vestron. I made a bunch of hits. The first picture I greenlight turned into a huge hit that was very good for my career. Sometimes it's better to be lucky than smart. That got me recruited to become president of 20th Century Fox just a couple of years later when I was 32. So now I'm at Fox. And we turned around Fox. We went from last place to box office to first place.

[A]

Who recruited you to Fox?

[B]

Joe Roth, who is chairman of. Had been newly named the chairman of the studio with the support of Barry Diller and Rupert Murdoch.

[A]

Okay, so what was Barry Diller's role at Fox? At the start?

[B]

He was the CEO of Fox.

[A]

He was the CEO, but then Rupert Murdoch.

[B]

Well, he was the owner. Yeah. Okay. News Corp. Owned it. Okay.

[A]

But this was a flat out turnaround.

[B]

The studio part was because they were in last place at the box office and they weren't doing well at all, weren't making a lot of money.

[A]

But you're 32.

[B]

Yes.

[A]

How do they identify you as the guy to hire for this?

[B]

So it's sort of a long, complicated story, so I'll try to.

[A]

Give me whatever version you want.

[B]

So in those days, imagine like the independent businesses over here siloed, and the major businesses here, and never the twain shall meet. So Joe Roth was an independent producer, and he had never worked in a major studio. And he made movies for vron. That's how I knew him. He made Young Guns and Young Guns 2 for Vron, which were hits for us. And he and I became friendly in the way that I aimed. Well, first of all, a friendly person, if you don't know that. Secondly, like, when I work with people, I want to develop relationships with them. And he was a highly creative person, a good guy. So we became friendly. Not intimate friends, but friendly. So I'm at Vestron for a couple years. I'm getting very worried about Vestron's business model for an array of reasons. And Vestron senior leadership, the person I

[A]

reported to, does it have anything to do with technology?

[B]

It had to do with the fact that the reason for Vestron to exist was that they were a pioneer in home entertainment, but everyone else got into home entertainment. You can never have a competitive advantage in the entertainment business through distribution only. That's why Netflix produces content. You can start with distribution only if you're a pioneer, but you got to immediately go into production. And production is a very tough business, as I said earlier. So Vestron's not capitalized to be a diversified film and television production company with a video game division. Sorry, a video store division, not video games. And it's apparent to me they're gonna have a problem. So I start looking around and for a job. And remarkably enough, at the age of 31, people are not exactly lined up knocking on my door to ask me to be president of a major film studio. But Joe gets this job as chairman of Fox and behind the scenes. And this I was not aware of, but I became aware of it. Barry said to Joe, look, you've never worked at a major and you've never run a business. You're an independent producer. But he needed creative engine to turn around the studio is where that. Which was true. You gotta hire a business guy to support you here, to be your partner in building the business. So Joe comes from the independent world, remember, totally different world than major world. He has no relationships in major world. But in independent world, I'm kind of well known. I'm president of the biggest independent. We've done really well. I greenlit Dirty Dancing, which was the highest grossing independent film of all time then. And stayed that way for a very long time until, pop quiz.

[A]

What? I don't know.

[B]

Blair Witch, many years later. So he's looking around, he's like, well, who's the number one guy to be the business guy at the studio now? To say that I wasn't the number one guy. I was not the number 100 guy. I was the number one guy in this little narrow independent entertainment business. So he called me up and he was like, do you want to. Well, I called him actually, say, congratulations. He said, is that the only reason you're calling? I said. He said, might you want to come here and work here? I was like, coincidentally, yes. And he said, so do you think you'll be in LA anytime soon? I'm like, yeah, like house Thursday. And so he's like, good. So we meet at the Bel Air Hotel for breakfast, which was a big thing in those days.

[A]

I'm very familiar with that. Breakfast.

[B]

Yeah. And that's where in those days, like, if you were chairman, you went to Bel Air for breakfast. If you were president, you went to the Polo Lounge. But anyway, separate. So we're meeting at Bel Air on a Friday morning, because I think I said, I'm coming Thursday anyway, meeting Friday morning for breakfast. And we had a very nice breakfast. And he says, do you want to do this thing? And I said, that sounds pretty interesting. He said, are you free to meet with Barry and Rupert this morning? And I said, as it Happens.

[A]

No, I'm a little busy.

[B]

Tied up. Yeah. I have to rearrange my sock drawer. So I go over to the studio, and I walk into a room with Barry and Rupert, and Barry asks the very incisive questions that he does. And Rupert sat rather quietly. I'm not sure he even asked me a question.

[A]

Is that normal for Rupert?

[B]

Yeah, he's a great listener. And in those days, he was learning the film business. And remember, I was only going to be responsible for film production and then worldwide film and television, home entertainment distribution.

[A]

What year are we in?

[B]

This is 86.

[A]

So what is the scope of Rupert Murdoch's business at this point? Is it just the newspapers?

[B]

It's News Corp. No, it's a pretty big business at this point. It's worldwide newspapers. That's a lot of it. And then, of course, the Fox assets is pretty much what it was, but it was a big business.

[A]

All right, so take me back to. You're in a room with.

[B]

So I'm in the room, and I can visualize it like it was yesterday. And we have. And Barry asked me these really tough questions. And I leave the office, and the head of HR walks toward me and says, okay, would you like to do this? And I said, sure. And I walked into his office and signed the contract. And that was how it worked.

[A]

But did Barry say, you're hired, or they just.

[B]

It was like, yeah. Like, the HR guy was like, okay, come on. And that was how. It doesn't happen that way anymore.

[A]

What did you. I want to go back to the story, but I'm curious because I just finished reading Barry's autobiography, which I thought was excellent.

[B]

Yeah, it's good.

[A]

What did you learn? Because you've. You've, like, worked with him and, like, known him.

[B]

No, let's be clear. I worked for him and for four years, and I learned an enormous amount. I've stayed friendly with him ever since. I've lunched with him a couple times a year.

[A]

So can you tell me, like, some of the things that you've learned from Barry or things that you think stand out just about him as a person?

[B]

Yeah, I mean, I learned. I mean, he taught me the entertainment business, so I learned everything from him because, remember, I knew very little. I mean, I was really. And I. Thankfully, I knew what I didn't know. To this day, I'm good at knowing what I don't know. And I'm. I'm a. An avid learner, but I. I've never. I never resisted learning more. And I'm comfortable asking questions, including dumb questions. I have to be because I kept getting thrown into these big jobs much earlier than I should have been.

[A]

He kind of had that in his

[B]

career in a different way. He really came up more on the creative side.

[A]

Yeah.

[B]

And he also innovated more creatively than I did. If I can give myself credit for innovation and be more on the business side and less on the creative side.

[A]

But is there anything that you remember, like discussions you had or stuff he told you implicitly that you applied?

[B]

No, I just remember the form of the discussion, which was a lot of very robust debate with a lot of heat around it. And I used to say to people, we argue all the time, Barry and I, and he's right 99% of the time, but 1% of the time I'm actually right. So that's how I learned from him. And he was patient with me most of the time. But you had to have a strong stomach to. He was famous and fierce in those days. He was not like junior. He was very senior in the industry already, never mind what he's done since. And he was scary. Oh, and by the way, it's not like if this job didn't work out at Fox or other people lining up to hire me. Like, I was young, I was newly married, I had a kid at a mortgage, like, I needed to keep my job. But I understood that this was his dialectic and if you backed down, if you didn't argue, you were done. I understood it wasn't personal, just wasn't personal. Other people took it personally, like a personal attack or criticism. I just knew that it wasn't. It's not like it was personal on the good side either. It's not like if he were sitting here, he'd say, oh, yes, I love Strauss. I thought he was so amazing, he might not even remember I worked for him in those days. Therefore, I knew it wasn't personal. It wasn't about me. It was about the thing itself, was arriving at the right conclusion. And I wanted to arrive at the right conclusion too. And I wanted to learn. I had some really bad days with him, don't get me wrong. And it was very, very taxing. One of the senior execs at the studio was a woman named Lucy Salhaney who ran television. And Lucy and I are very close. And we had a so called president's meeting every Monday, which was Rupert and Barry and all the division heads. And I was in that meeting and I was, I don't know, 10 or 15 years younger than the youngest, next youngest person in the meeting. And I was the one who would argue like I argued all the time. Many other people were just like, shut up and sit there. And Lucy said, you remind me, remember when you were little and you had that blow up clown doll that everyone had that you would punch and it would go over and then bounce back up? You remember that? Yes, everyone had that. I had that. And she said, that's you. You just get punched, you go over, you keep coming back up.

[A]

But are you naturally like argumentative?

[B]

No, not at all. I'm much more collaborative.

[A]

I thought so. This is the vibe I get off of it.

[B]

But the matter, I wasn't in charge. It was his style and I had to comport with his style to get to the right conclusion.

[A]

What are you learning from Rupert at this time? I mean, you're in, you're in these weekly meetings with him with maybe the most success, but he's maybe the most successful person in media of all time.

[B]

He was extraordinary. What I learned from him really was in a different moment, which is he over leveraged the company during my tenure there by buying Star. And the company had real trouble with its debt facility. And my recollection is they had a diversified debt facility with like 150 banks and a whole cross default mechanism and which was great when things are going well because I kept the interest costs low and horrible if things go badly because the cost of falls, suddenly things go badly and he was at risk of losing the whole thing. I went on the road show with a bank roadshow with him for a couple of the visits. And what I found remarkable was he was cool the whole time. He was, wasn't overconfident, he just wasn't ruffled. I mean he was at risk of losing his whole business, which had been his family's business and just didn't phase him. He just kept going and he had, he was laser focused on the conclusion and he reached the conclusion just by being focused and calm. That's really what I learned from him. It's incredible.

[A]

Okay, so you're 32, you're doing this turnaround. What are the insights you're deriving at Fox that you're going to wind up using later on when you do Take two.

[B]

So the biggest insight, well, we can get into how I work with creative people because that's probably the most important long term thing. But I think going back to your question about video games, so it's now mid-80s because I've been there for a couple years and I now really understand the economics of the movie business. Maybe I'm slow to pick it up, but I got it. And they're terrible. They're terrible underlying economics. And they were bad. And they've been bad since 1955, since the consent decree that basically disaggregated distribution from production and turned the motion picture business from a studio system into a boutique system. And a rubric for good versus bad entertainment businesses. A boutique system is generally bad and a studio system is generally good or can be good. The 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 wasn't. Didn't happen overnight. 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 the deal they were able to negotiate so they didn't go across the street. And if it's a flop, you as the studio bear the entire cost of flop, obviously, whereas in a 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, 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, for brilliance, and a business with a reputation for being bad, it is the business's reputation that will stay intact. And again, I didn't. 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. Astron 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 of 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. And 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? I thought, it's a video game business.

[A]

How did you know that?

[B]

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, I said, I think this is going to be huge. And remember, that was a very unpopular view in the entertainment business because of the Atari disaster, which people still saw in bright, flashing neon.

[A]

So almost the way you get what you called in the past the religion on video games is by comparing it to what is the movie studio version of that today?

[B]

Yeah. To your point about being a student of the business.

[A]

Okay, so then you have that insight.

[B]

Yeah. So now I've been it. I've been at this studio for whatever it was, nearly four years, and we've had a great run. And I think I got to go do the video game business.

[A]

So what's your next move?

[B]

I went to Rupert and I said, next big business is the video game business. And 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. 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, build a video game business. And I said, well, the only thing is, I see it as an entrepreneurial venture, so I'd like a piece of it. And he said, no interest. That's not on offer.

[A]

So I was like, why do you say no?

[B]

Because Ripper doesn't have partners in his businesses except as public shareholders.

[A]

Okay.

[B]

And it's just as. There's nothing like this. 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, 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. Are you interested? And I left. I took a 95% pay cut and move 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.

[A]

Because you wanted equity, you wanted ownership in the.

[B]

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.

[A]

Did you think that you were always going to be an entrepreneur? Because at this point, if I understand your career, you've always just had jobs. You're a phenomenal operator, you're the business guy. But did you? Did you. In your heart, you're like, I feel like I should be running my own thing, I should be an entrepreneur.

[B]

Yes. And I wasn't ready, as it turns out. But I did think that. And I knew 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.

[A]

Why do you say you weren't ready?

[B]

I didn't have much money and I had a young family. And 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.

[A]

I don't think I know the story of Crystal Dynamics.

[B]

That was the company that.

[A]

Tell me about the company.

[B]

Well, it was set up by Kleiner Perkins or backing two very talented women with backgrounds at Sega at the time. And they needed a CEO and they wanted a CEO from the entertainment business. So hired me.

[A]

And literally it was a video game studio.

[B]

Yeah. So I set it up. I got them distribution deals. I raised a bunch of capital, lots of capital, because I didn't raise 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.

[A]

Before you took the job?

[B]

Correct.

[A]

Okay. Because I was gonna 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.

[B]

It was really interesting. I'd never done music and they said I could start a video game company.

[C]

Strauss Zelnick prides himself on running what he calls a rational organization. He said that he tells his talent that the company they build will 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. We 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. That 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 increase 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.

[A]

So talk about starting the video game company inside of bmg.

[B]

So I'm a hired 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 recruited music distribution system to distribute worldwide, which was pretty smart because we had this massive worldwide system of local offices so we could slot right into it without Adding any overhead. That was the beauty of doing this.

[A]

Say more about that.

[B]

Well, in those days when you distributed records, you actually had to have, you know, physical offices to go sell physical discs, CDs, the beginning of CDs and the end of vinyl to stores.

[A]

Very similar to video games at that time. Because you're buying physical.

[B]

Exactly. You're buying cartridges and then eventually discs.

[A]

Were any other music companies doing music and video games?

[B]

No. 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.

[A]

Can I pause you there? Sure. At this point, video game, like, there's no free to play. There's no. You can't download anything over the Internet, right?

[B]

Correct.

[A]

So the. The economics of the video game is very similar to recorded music. It's.

[B]

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 we were. There were still cartridges. It 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.

[A]

But did you have any inclination at that time that there would. There would be. There would be an end to the cartridge or.

[B]

Oh, sure. No. I knew it was becoming a disk business. Absolutely.

[A]

You couldn't predict what was going to happen after disks.

[B]

No. Okay. No.

[A]

So go back to where we are in the story. Sorry.

[B]

So anyhow, we, we. I'm, by the way, I'm running the record company. That's my day job. Because it's a big business that Jay is building up the video game company with my oversight. But it's a, you know, it's a. A Skunk Works project. It's tiny little.

[A]

Yeah, you said 40 million compared to revenues.

[B]

It was like a rounding error.

[A]

Okay.

[B]

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, Bertelsman, the parent company at bmg, whose name was Thomas Middelhoff, 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. I 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.

[A]

Why?

[B]

He just didn't believe.

[A]

Okay?

[B]

He was a person who 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. 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, 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. So $20 million. And so we closed that deal. Now we own 20% of this company. And I go to Thomas and I said, Listen, we have 5 billion in revenue. 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, don't sell the stock in the open market. So we sell the stock. 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.

[A]

Oh, no, don't tell.

[B]

So the name of the public company was Take Two Interactive, and the first release was Grand Theft Auto.

[A]

We're going to pause right here, though. Grand Theft Auto is the most successful media property of all time. Is that.

[B]

I think so. Yeah. Yeah.

[A]

Ok.

[B]

So.

[A]

Oh, my God.

[B]

All right. So that's my war story on being in the video game business. Now, remember, now I'm out of the video game business. I'm running a record company.

[A]

You had to be pissed off at this time, right?

[B]

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. This is my boss. He gets to make strategic decisions like this. I knew it was a foolish decision,

[A]

but how could you think that you

[C]

were going to work?

[A]

Did 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.

[B]

That's correct. I did leave. I did leave.

[A]

Okay, so then what happens next?

[B]

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 as a professional executive. So I decided to start zmc.

[A]

Explain what ZMC is though.

[B]

It's. Well, today it's 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.

[A]

And if that is your thesis, then video games is the perfect.

[B]

Well, yes and no. Actually I 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 the top 10 4th quarter toy ish business with bad inventory characteristics because it's 2001.

[A]

Okay.

[B]

Yeah. And no so. And it was cyclical and you know, the console generation would, you know, cause the business sort of come and go and I know I wasn't anxious to get back into that business.

[A]

What's the first thing you're doing with zmc?

[B]

We started buying Take two stock. No, I wish no direct marketing companies that were becoming digital. Market research companies that were becoming digital. We turned around a Japanese record company of all things. So you know, whatever deals that we could find, often, often very, very troubled companies because remember, we had no capital. Oh, I left that part out. We had no capital.

[A]

So how do you start a company with no capital?

[B]

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. And I mean like you couldn't believe this was actually going on. And I would run around and talk to capital providers, professional financial services firms and say, here's our vision. We're trying to buy companies to build them up and create value. And they'd be like, okay, 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 to buy you. And they'd be like, okay, 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. And I'm like, like, there is a problem here, like 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 great resumes. So we would 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? We'll finance it for you. I realized like these were empty words. They said it to everyone. They were just looking for free options.

[A]

Yeah.

[B]

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 and it was because

[A]

your idea is to buy, improve and sell.

[B]

Correct.

[A]

You're not holding for.

[B]

We did. It took us a long time. It took nine years. But it was very difficult because it 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.

[A]

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.

[B]

Even early 2000s. But this all has happened.

[A]

Yeah, exactly.

[B]

So why would I want to be in the record? Yes. Yeah. I didn't want to be in the record business. I was like, been there, done that. I had no interest and 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 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 okay, 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 and buy a company together, called me up and said, here's a perfect deal for you for your first deal. It'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 a 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, okay. A week later, he calls me and he said, you know, 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 and your first deal. And I said, okay, listen, it's 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 Feder, 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, okay, 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. I'm in my dining room and there's like a wall phone, like a long time ago, this 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. 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. It 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. Unheard.

[A]

That's insane. And this is the first deal of.

[B]

That was the first DMC deal.

[A]

That's incredible.

[B]

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.

[A]

So take me to take two.

[B]

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, very tiny balance sheet. I'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 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. And I said, yeah, I know. And I thought, to have a relationship with Carl Icahn, 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 what happened 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, I need to thank you. He said, I told you I 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. So 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 Chinese restaurant I forgot the name of, and an Italian restaurant called Il Tunello. It was 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 Iltonelo, 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 to look sort of one smooth movement, Martini in the hand, sits in the chair, drinks the martini, puts the empty glass down. That was how dinner started. And we have a very nice dinner. 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 Seydoff, who's still, to this day the president of Take Two, got really annoyed. Carl speaks his mind because I was asking them to do research for Carl Icahn. He's like, he is the richest guy on Wall street, and we're doing spec research for him. Oh, and incidentally, he has informed us we will never get paid. What are we doing here? I said, I. You know, I just don't know. But I feel good about this. So one day Carl calls up and he says, 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.

[A]

I used to own 20% of it.

[B]

Take two is in very bad shape. It's failing. It's got very bad management. The chairman had been indicted. It was under investigation. That hadn't filed financial statements. And it wasn't even that cheap, despite

[A]

all that, because the chairman is under indictment.

[B]

Yes. Okay.

[A]

They're being investigated.

[B]

Yes.

[A]

They cancel their annual meeting. They're not filing financial statements. The company is being investigated by a bunch of different.

[B]

Four. Four entities.

[A]

Okay, four different entities?

[B]

Yeah. IRS, SEC, New York DA's office and

[A]

FTC, they have how much in revenue?

[B]

About 700 in revenue and losing loads of money and no debt, thankfully, and about 50 in cash. And we looked at the numbers and we're like, they're going to be bankrupt in six months. That's what's going to happen here.

[A]

And you're like, great.

[B]

No, 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 disaster, stay away from it. By the way, I've done video games, I have 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, what was the market

[A]

cap of the company back then though?

[B]

About 700.

[A]

So it went up 7x from when you had to sell because it was 100 million when you had 20%.

[B]

Okay, okay. So you know, it's not great, frankly, in a growth business. And they had increased the revenue materially. 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 stake in Take two. Can you refresh your memo and, and do this with a friend? At this point, Carl Sladoff like loses his mind, his headaches. He said, all right, so it was bad before when we were doing free work for Carl Icahn. Now he's pimping us out to his Wall street buddies for free. Like this is outlandish. And I said, you just never know where this can go. You never know. So we do the memo which essentially says, once again, it's a mess, stay away. Again, not being so forward 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. 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, says, holy shit. This company has a plain vanilla unamended Delaware charter. And 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, but. And we didn't have any money, so we couldn't buy stock. It was not 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. In 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 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. That'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. Oh, and 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, okay, 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. And 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, and 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. 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. They just 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 probably could 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, 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. And 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, and 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. How 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 was 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. That 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, said, we'll accept it. And the next morning, Friday morning, I walked into the company and walked into the corner office and became chairman of the company.

[A]

That was what year that was?

[B]

07.

[A]

And you're still running it?

[B]

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.

[A]

So this is what you described as basically a hostile takeover. No capital.

[B]

Yeah.

[C]

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[A]

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?

[B]

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.

[A]

Did I hear correctly that you cut something like 40 to 50 million?

[B]

Yeah, we cut about 40 million.

[A]

Explain how you did this.

[B]

Well, we have an approach. You know, 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. 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. You 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 and 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 company, has. Big companies has deals with third parties. You know, I don't know. This was 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 discs. And we do a top 10 vendor survey. So all the top 10 vendors and how much we spend with all the. 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 put in new expense policies. 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, McDonald's on Tuesday with, you know, Mike? Like, why? Like That's a great way to alienate David. And if David has another option, he's 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.

[A]

Especially at a company like this. How much money was GTA making back then?

[B]

When GTA released, the company would have a meaningful profit, like 100 or so a year. But it only released every four years. They lost money the rest of the time.

[A]

Okay, so what was your plan for that?

[B]

Make other hit titles?

[A]

This is, it goes back to your, your insight from. 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, like, no, I want to run a movie studio in 1926, not 1987 or whatever.

[B]

Exactly. And here we are.

[A]

So then you, you took that idea and you're like, we're going to build a movie studio and how are we

[B]

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 I ever ran. When 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 tends to work.

[A]

You take over the company. The market cap is 700 million, whatever. Today it's 30 billion, whatever, 35ish. That's an insane run, by the way. That's absolutely incredible.

[B]

Thank you. Great team.

[A]

So can you explain the ideas that you're putting into place? Was anybody even thinking about taking ideas from building movie studios in the 1920s to video games in the early 20s?

[B]

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.

[A]

No, I meant you.

[B]

Was I thinking.

[A]

No. Yeah, like any other people doing.

[B]

Oh, doing. I was doing.

[A]

Yeah, like you were Applying this idea.

[B]

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. And 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.

[A]

So what were these missteps?

[B]

I mean they're daily. I mean I'm probably making one right now.

[A]

No, but what were the big ones back at the very beginning? Because you're a much more precarious position back then.

[B]

Oh, no beginning. We didn't make too many mistakes. I mean, how could you. Like 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.

[A]

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 put yours aside. And you've said some stuff where in the entertainment business the only people that matter. You're like, I don't matter. It's the people that make the hits that matter. Which is a very interesting thing to say.

[B]

That's the added benefit of being true. Yeah, you can replace people like me.

[A]

Yeah, you can't replace the Hitmaker. But what's fascinating to me is your pitch them is just like, I'm just going to run a rational organization. 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 over a long period of time. That is an edge. Can you talk about that?

[B]

That was a sort of nice to have the must have was. We are going to give you the resources, creative and financial to pursue your passion. We'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 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, we can live to play another day. That took us a few years.

[A]

Because these super talented people also tend to be highly disagreeable, somewhat erratic. And I just find it interesting that you kind of balance their. You say you're not talented, which obviously your talents are different, you're very talented, but I think you mean a creative way. You're not the one that can create the video games.

[B]

Not in the least.

[A]

How do you deal with these very disagreeable, talented geniuses?

[B]

I love them.

[A]

Who?

[B]

Seriously?

[A]

Okay, so what do you got to say more about that?

[B]

I mean, you have to sincerely care about other people to be an effective leader. I 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 gotta leave. So one of our competitors at one point had 500 sexual harassment claims at their company from one guy? No, no, unfortunately it was broadly distributed. You know, and we don't have, have, you know, we've had obviously a few things here and there, but we don't have claims like that. We are, 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. 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 know, you said it earlier like, and I think I learned this with Barry Diller. I just don't take it personally. It'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 offsides 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. But he used to send the most outlandish and unpleasant email. 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 in a 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.

[A]

Right now.

[B]

I just started deleting his emails. I would see the first.

[A]

Oh, I thought you meant delete him as a person.

[B]

Oh, delete his emails. I was like, how can I be offended if I delete them? I just leave to lead them without reading them. Absolutely. If I read them, they'd upset me. Eventually he had to go because it was just too bad. But. But I put up with it for a long time.

[A]

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.

[B]

Well, in the entertainment business particularly, I think in all.

[A]

I mean, this is something Munger and Buffett, like you mentioned Buffett earlier. I'm obsessed with them. And that was whole. Munger's whole thing. It's just like. Like we're just able to be rational over long periods of time.

[B]

Yeah, 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, we need to give you $10 billion to do X. That's magical thing.

[A]

That's very likely going to happen.

[B]

Let me know. I'll. I'll give you a call. I'll give you 10%. That's magical.

[A]

That's better. What Brad Jacobs gave me, Brad Jacobs was episode three. We all go to his house. This guy's laughing, he's like, I love David. He goes, I raised $750 million out of his audience. I had to pay him a fee. And he like slapped his knee. And I was like, that's not funny.

[B]

I got. But I had dinner with Carla.

[A]

There you go. You got a. You got dinner and you found out he didn't even know your name. And then he put you to work.

[B]

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, great, 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. I was like, what does that mean? And this is a long time ago, so it's 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'd 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. At 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.

[A]

Yeah, that's a huge game now.

[B]

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.

[A]

Why?

[B]

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.

[A]

So you just trusted the intuition of the talent.

[B]

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.

[A]

The 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?

[B]

Yeah.

[A]

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.

[B]

Well, no, no. November 19th. I do know.

[A]

Oh, okay.

[B]

No, it's been announced, but this has been pushed back, I think, twice for,

[A]

like, how many years?

[B]

I think we're about 18 months behind the original date.

[A]

Okay.

[B]

Not much more than that.

[A]

Is it the most successful video game of all time?

[B]

I think so, but it depends on how you count. Like, if you count from revenue.

[A]

Just revenue.

[B]

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.

[A]

And you don't disclose the revenue for GTA 5, correct?

[B]

Not the total revenue. It's a lot. The reason people keep playing is because it's constantly updated and it's really great. And the most recent content pack was awesome.

[A]

And honestly, like, the social element to,

[B]

like, catch up can actually talk.

[A]

Exactly.

[B]

Connect and play together. And. Yeah, it's amazing that people don't realize that, you know, online games are highly social experiences.

[A]

Yeah. Especially when you see this with, like, kids now, with, like, Roblox and everything else.

[B]

Like, my mom is 90. She plays. She plays bridge online. And Buffett. Sorry, with Buffett. Warren Buffett? Never asked her. Somehow I doubt that. She's good, though. And 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 a. But this is an industry that speaks to little kids and people.

[A]

You know, gaming is enduring. I mean, we played that since the dawn of humanity. They 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. The 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

[B]

sound a little magical, but you have to dig into that was my note

[A]

based on my interpretation of what you're saying. And you're talking about this idea of creative visualization, which again, people think is like some willy foo foo thing. I've read 415 now biographies of history, of entrepreneurs. I've kept every single note, every single highlight, every single transcript of anything I've done for that. That project I've been doing for a decade in this giant searchable database. Visualization 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?

[B]

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, 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? And 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. You 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. And 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. 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 okay 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. And 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 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. We've kind of exceeded our goals and we're not done yet. But 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 at take two. There's not one person who can't tell you that. It's simple, it's straightforward, it has the added benefit of being true.

[A]

This is why I asked you before we started recording, like, if you mind if I do an episode on your book for my other podcast. Again, I want to read this because I think it's really important and people have asked me before, it's like, what's the most important thing you've learned from this crazy decade long study of history? You've done. I was like, if I had to put into one word, it'd be focus. They are just unbelievably, almost like a different species in terms of how they can focus. I want to read that part I just read 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.

[B]

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. If people email me or text me or slack me, I respond. And I'd 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. And 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? Because 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, which is 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, say, yes, you're going to be fine.

[A]

Are you surprised? So, first of all, I've heard you say this, and you're like this to me, because when we were at lunch and I was like, hey, do you have a team I need to go through to schedule the podcast? You're like, no, we're going to do it together. Just text me. And you respond, are you surprised how few people Take you up on this. The fact that you will respond to emails or to messages?

[B]

No. Here's what surprises me. And this part I don't get. So I spend like 20 to 25% of my time mentoring and coaching people,

[A]

which I want to talk about.

[B]

Yeah. Using the tools in the book. And as you saw in the book, some of them are exercises 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, you still have to do some homework. And I don't schedule. Maybe I don't even schedule. I like having an 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. And 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. I don't think I have an enemy in the business. And you probably know this from your homework. I know everyone and I like everyone. And as most people like me, and I think candidly, I have a very good reputation. Nonetheless, I think people confuse that with somehow 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 Icahn. I had to hire a team. I had to pay the team out of my pocket. I had to manage the team.

[A]

Think of the story you told earlier when you were recruited to 20th Century Fox. I have a maximum that appears in these biographies of history entrepreneurs like opportunity handled well leads to more opportunity. You had to Handle the opportunity at Verster. How do I say the company name restaurant first? For this to be like, hey, I need some help now. The whole thing is like, that's why. He'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.

[B]

Yeah.

[A]

And that will. Then you don't have to worry about the opportunity. It will unlock future opportunities.

[B]

Or it may not, but it's the best that you can do.

[A]

What else would you be doing anyway?

[B]

Do anything better?

[A]

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.

[B]

Yeah.

[A]

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 over the last 25 years, from 750 million to 40 billion. You know, and it's just like, I'm going to apply this rational. I'm in a good business. There's technology tailwinds here. And I'm going to apply this rational organization working with the best people possible. And the score kind of score takes care of itself over multiple decades. You said you want to do 20 billion. Well, you've doubled that, and you'll probably keep going on to that.

[B]

That's the goal.

[A]

So 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 very comfortable, almost like you're in the service business. Is that a way that you think about this or no?

[B]

Yeah, 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 isn't obvious or is above someone's approval level, it comes to me. You know, I'm not writing memos. I'm not, you know, I'm not doing Excel spreadsheets.

[A]

And are you adapting your style to each individual talent?

[B]

Of course.

[A]

Okay, so this is.

[B]

Well, I mean, I'm true to who I am, but of course.

[A]

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.

[B]

It sounds like how to be the Most Popular Boy in the Class.

[A]

It's just like so many people told me about that book. I didn't read it because, like, the title's terrible. But you almost saved me the need. I already read the book, but 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. That is really a book.

[B]

That's the story of the book.

[A]

That is really a book on sales

[B]

and leadership and friendship.

[A]

So explain how you apply that inside of your own work.

[B]

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 at any level in the organization. He 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? 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 to sound 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 pouring coffee, which sometimes they are, to see if maybe I can brighten their day a little bit. Like, why wouldn't I? There's a great story in Dale Carnegie's book where he tells the 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 said, I'm struggling with what I can say because I really was. This is an exercise for me. He gets to the front of the counter and the postman 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. And 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. You know, 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? That's what I'm thinking.

[A]

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 a, essentially a love letter to capitalism.

[B]

And the reason I said or it's apocryphal. Not clear whether you think you can or you can't. You're right, he's. Yes, that's attributed to him. It's not clear it was him. But we use that line at DMC for the first couple of years because it was so hard to do. We did.

[A]

It's in your book. Yeah, that line is in.

[B]

I haven't read the book in a while.

[A]

Oh, I read it this past week. But no, to the degree that we do have any kind of influences, it's 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 that make other people's lives better. They build wealth for themselves, their family, their employees. They create jobs. We had John Mackey on this podcast, founder of Whole Foods. One of the stories he told was one of my favorite stories. Just like, because of the. The fact that we went public early and. And there was stock options for. So for our employees. Like, these are grocers. These are normal. Just, they're. 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, 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. It's in service of other people.

[B]

Well, I mean, listen, I'm not a saint, and I definitely my own personal ambitions, including material, of course. 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 a Fox when I read it.

[A]

You dodged the book for a while.

[B]

I did. I saw it like you. I was like, really? 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? What do you think? Let's talk about me. And I could mask it behind sort of a. Sort of a humble exterior, but 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.

[A]

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

[B]

out, I have the answer. I'm the smartest guy in the room. I 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. 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?

[A]

Have you seen anybody have long term success that doesn't have a service mindset?

[B]

Sure, they're all different styles at work. And one of the things 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. Not 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.

[A]

He does not have be kind. It's one of the company values. I just did an episode on 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.

[B]

So 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, by the way. Thank God there are. Because if we were, you know, 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. Barry Diller style, for example. The, pardon me, the Socratic method that he pursues, which can be brutal. It really can. I mean, I can't use a. 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. 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. It 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.

[A]

You're not going to miss a meal for several lifetimes, let's be clear.

[B]

And. And, you know, I haven't built the biggest business, but I built a business I'm proud of.

[A]

Build a giant business.

[B]

Yeah.

[A]

You don't think in those terms.

[B]

I reject the notion that one size fits all in almost anything in life.

[A]

Oh. So there's something I want to transition to and ask you about because you have all this experience in media. So, 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 Ek, 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. He was a technology entrepreneur in his early 20s. They said like, oh, like, what's my options? I 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 in 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.

[B]

The entertainment business. Yeah.

[A]

Okay. What's the difference between the media business and the entertainment business?

[B]

Well, media is just a broader rubric that can include any. It could include advertising, for example. Would be media business.

[A]

Why not describe it? Like, what's the difference between entertainment and video games then?

[B]

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.

[A]

Okay, so explain, like, how you think about this.

[B]

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. They're very different experiences. They're both entertainment experiences. I think to call them both video game experiences maybe understates the diversity of experience.

[A]

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.

[B]

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. So yes, in that way, but no, at the end of the day, playing a video game is still a very different experience than watching a linear television show or movie. It just is.

[A]

This goes back to your, your insight that I don't even think we talked about this, but when you thought about new media, you're like, then the most valuable new media is not going to be passive, it's going to be interactive. I think.

[B]

And that's, that's the case with video games because the biggest entertainment business and it's growing more rapidly than any other

[A]

and the size, it's bigger than all the other forms combined.

[B]

Is that at the software level?

[A]

Yeah, that's an insane like, yeah. And it's growing faster.

[B]

Absolutely. Yeah. We're roughly double the rate.

[A]

Is there any other thing that you would be interested in pursuing in media besides video games?

[B]

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 you know, live entertainment's really interesting space, for example, that's growing.

[A]

How is Take Two using AI right now?

[B]

We have hundreds of projects going on and we already have promulgated enterprise software. So we have enterprise versions of ChatGPT 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.

[A]

Let's go back to that story where you're like well, we need a 20th Century Fox, we need a business guy. Let's grab this guy. So when you realize you needed an AI person, did you create an entire role? How was the structure?

[B]

No, we have a new cto, Dave Klein, and it all reports today because it's technology, it's, 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, you 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 would say we're getting internal criticism and that we're not moving fast enough, but we're trying to.

[A]

So what is your overall viewpoint on AI though?

[B]

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.

[A]

But you're doubtful of the creative ability of AI.

[B]

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. That'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 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. Asset 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 create a You know, 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. So it's, it's not that I take at all lightly the potential benefits of new technology. To the contrary.

[A]

No, I think your entire career has

[B]

been a story of my career. It's just that when, you know, our stock goes down by 50 points because people are like, anyone can make a video game. That was the thesis. Any with AI, anyone can make a video game. It's like, anyone can make a video game last week. Like, anyone could make a video game five years ago. The technology's 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? 0 to 5. You know who makes them? Thank you very much. We do. This is 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 3 years. Technology exists prior to AI to clone GTA, but it won't be GTA, it'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.

[A]

Perfect place to end. Charles, thanks for the time. This was awesome.

[B]

Thanks for having me.

[C]

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 have obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through founders.