Podcast Summary: The Look Back – Keith Newman Interviews Gary Kusin

Episode Title: Gary Kusin
Release Date: June 11, 2024
Host: Keith Newman
Guest: Gary Kusin
Podcast: The Look Back: Keith Newman interviews top Entrepreneurs and Influencers on "Their Startup Journey"

1. Introduction

In this engaging episode of The Look Back, host Keith Newman welcomes entrepreneur and author Gary Kusin. Gary discusses his latest book, Always Learning: Lessons on Leveling Up from GameStop to Lauria Massier, and delves into his extensive experience in retail, private equity, and entrepreneurial coaching. The conversation is enriched with nostalgic anecdotes, humorous exchanges, and insightful reflections on Gary's diverse career journey.

Notable Quote:

Keith Newman (00:17): "Gary just dropped a book called Always Learning Lessons on leveling up from GameStop to the famous cosmetics company Lauria Messier."

2. Early Ventures: Founding Babbage's

Gary Kusin recounts the inception of Babbage's, the pioneering video game retail store that eventually evolved into GameStop. Despite neither Gary nor his co-founder Jim McCurry being avid gamers, they identified a burgeoning market in video game software and home computer classes.

Gary explains, “We did not have a passion for video games either. Jim and I went to graduate school together...” (01:06). Their strategic decision to capitalize on the emerging video game industry was driven by market analysis rather than personal interest.

Notable Quote:

Gary Kusin (02:05): “We did not have a passion for video games either. Jim nor I were gamers.”

3. Strategic Insights and Challenges

Gary and Jim's background in consulting and retail provided them with unique insights into the potential of specialty stores. They observed the rapid growth of specialized retail chains like The Gap and Zales Jewelry, leading them to advocate for a single national brand instead of multiple local names within Federated Department Stores.

Gary shared, “We had everything lined up and that's how we started it. Not like, I'm a gamer, you're a gamer, let's go sell games.” (08:48). Their approach was rooted in understanding consumer behavior and technological advancements, particularly Moore's Law, which they leveraged to predict better gameplay and graphics capabilities.

Notable Quote:

Gary Kusin (08:48): “Not like, I’m a gamer, you’re a gamer, let’s go sell games.”

4. Growth and Mistakes

Under Ross Perot’s guidance, Babbage’s adopted a measured growth strategy. Instead of the ambitious plan to open 200 stores in the first year, Ross advised starting with one store to master the business model before expanding. This prudent approach facilitated steady growth from 1 to 7, then to 23 and 50 stores.

However, Gary acknowledges critical mistakes, such as failing to pivot in response to changing consumer behaviors and technological advancements. For instance, delaying the move to power centers and strip centers led to lost opportunities in reaching customers more effectively. Additionally, not adopting trade-ins and refurbishment earlier hindered their ability to manage video game prices and hardware lifecycle.

Notable Quote:

Gary Kusin (11:25): “The biggest insight that we gained very quickly was that we had neither of us had ever seen a business that was both crazy seasonal and crazy cyclical.”

5. Competitive Strategies

Gary explains how Babbage’s (later GameStop) competitive strategies set them apart in the market. They prioritized rapid distribution and strong relationships with publishers by offering net 30 payment terms, contrasting with competitors who operated on slower net 60 to net 90 terms. This “fast pay makes fast friends” strategy enabled them to secure exclusive game releases and maintain high customer satisfaction.

Moreover, Gary and Jim avoided engaging with the trade press to protect their competitive intelligence, allowing them to outperform rivals like Toys R Us by maintaining operational secrecy.

Notable Quote:

Gary Kusin (25:47): “We decided that they had no idea something that what they felt was a throwaway line in an interview with you.”

6. Experiences with Tech Figures

Throughout his career, Gary interacted with several notable tech entrepreneurs. He shares anecdotes involving Scott Cook, founder of Intuit, and his long-term relationship with Electronic Arts (EA). These interactions highlight Gary’s ability to recognize and cultivate potential partnerships and investments that significantly impacted the gaming and software industries.

Notable Quote:

Gary Kusin (22:20): “The day I walked out of Babbage’s to leave and start my next company, I also at the same moment, walked onto the board of Electronic Arts, and I stayed there for 15 years.”

7. Transition to Kinko’s: Turning Around a Giant

After his success with Babbage’s, Gary took on the challenge of revitalizing Kinko’s, a leading copy and print service company. He faced a command-and-control private equity environment that clashed with Kinko’s entrepreneurial culture. By implementing his proven strategies from Babbage’s, Gary transformed Kinko’s from a struggling entity with an -11 million EBITDA to a thriving business with a 240 million EBITDA in just three years.

Gary credits this success to fostering an entrepreneurial mindset and conducting extensive on-the-ground research to understand store operations and culture.

Notable Quote:

Gary Kusin (30:25): “I believe that based on my stint really at Babbage’s and the culture that we built at Babbage’s, that culture was resident in Kinko’s and that they would receive me.”

8. Mentorship and Startup Insights

Gary discusses his unique approach to mentoring entrepreneurs. Rather than providing direct advice, he employs a Socratic method, sharing relevant personal stories to help mentees navigate their challenges. He emphasizes the importance of problem-solving and rigorous market analysis over simply pursuing one's passion.

Gary remarks, “Whoever came up with the idea that people should pursue their passion needs to have their head examined.” (37:12), advocating for a data-driven and strategic approach to entrepreneurship.

Notable Quote:

Gary Kusin (37:12): “Whoever came up with the idea that people should pursue their passion needs to have their head examined.”

9. Conclusion and Future Plans

As the conversation wraps up, Gary touches on his ongoing efforts to mentor the next generation of entrepreneurs and his book tour. He plans to engage with entrepreneurial students across various colleges, sharing his wealth of experience to inspire and guide future business leaders.

Keith concludes the episode by expressing his appreciation for the insightful discussion and the valuable lessons shared by Gary.

Notable Quote:

Gary Kusin (40:41): “I've had, you know, early days at Babbage's. I got a call one day. Guy says, hi, this is Bill Gates. I'm fascinated by what you guys are doing…”

Final Thoughts

This episode of The Look Back offers a deep dive into Gary Kusin’s entrepreneurial journey, highlighting his strategic foresight, resilience in the face of challenges, and his commitment to mentoring future business leaders. Through candid conversations and rich storytelling, Gary provides listeners with invaluable lessons on building and sustaining successful ventures.

Listen to the full episode here.