Strauss Zelnick - Playing to Your Strengths - [Invest Like the Best, EP.347]

My guest this week is Strauss Zelnick, the CEO of leading game publisher Take-Two Interactive. Maybe most well-known for its hugely successful Grand Theft Auto game, Take-Two is a sophisticated, top-tier developer, publisher, and marketer of interactive entertainment that owns Rockstar Games and 2K. Strauss’s passion for entertainment led him strong and fast into the industry as he worked his way from sales to CEO and transitioned from motion picture to gaming. Today we cover his approach to staying on the cutting edge of media development, unlocking talent and potential in those around you, and becoming the leader you were meant to be. His intensity and his standard for excellence come through clearly. Please enjoy my conversation with Strauss Zelnick. Subscribe to Colossus's New Show: Art of Investing Buy a ticket to Patrick and David Senra's live show. Listen to Founders Podcast For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Tegus Converge — the first virtual event centered on the world of investor research. When twin brothers Tom and Mike Elnick realized that the research process for investors was broken, they founded Tegus to fix it. Now the people behind the most trusted research platform are bringing institutional investors together to investigate the state — and the future — of fundamental research. On November 8th, join industry luminaries like IGSB Founder Reece Duca and Daniel Gross, AI Expert, Entrepreneur and Investor, to dig into the latest research trends and breakthrough technologies shaping the investment landscape. Register today at tegus.com/register. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes (00:03:39) - (First question) - Why the entertainment media sector is so interesting (00:05:08) - Key inflection points in the history of media (00:09:17) - The role of pure content in businesses today (00:10:32) - Requirements for being a successful media business operator (00:12:03) - Strategies for working effectively with creatives (00:16:13) - How to cultivate a conducive environment for creatives (00:25:54) - The allure of collaborating with Take-Two (00:30:09) - Strauss’ journey to becoming the chairman and CEO of Take-Two (00:37:42) - Strategies for reducing costs in business (00:41:16) - Embracing diversity in the video game industry (00:43:41) - Identifying high-quality intellectual property (IP) (00:46:04) - The inspiration behind Strauss’ book Becoming Ageless: The Four Secrets To Looking and Feeling Younger Than Ever (00:51:12) - Influential leaders for learning and growth (00:55:45) - The impact of technology and the rise of new platforms (00:57:00) - Common misconceptions about Take-Two (00:59:42) - Unique attributes of Take-Two projects (01:00:36) - Defining moments in the history of the business (01:04:19) - Anticipating the future direction of Take-Two (01:13:41) - Sources of motivation and inspiration (01:15:29) - The concept and value of a masterpiece (01:11:08) - Paramount values as a parent (01:11:38) - The kindest thing anyone has ever done for Strauss

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai.

• 0:35Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts and you can access all our podcasts, including edited transcripts, show notes and other resources to keep learning at joincolossus.com.

• 1:00Speaker 01

  Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 1:32Patrick O'Shaughnessy?

  My guest this week is Strauss Zelnick, the CEO of leading game publisher Take-Two Interactive. Maybe most well-known for its hugely successful Grand Theft Auto game, Take-Two is a sophisticated, top-tier developer, publisher and marketer of interactive entertainment that owns Rockstar Games and 2K. Strauss's passion for entertainment led him strong and fast into the industry as he worked his way from sales to CEO and transitioned from motion pictures to gaming. Today, we cover his approach to staying on the cutting edge of media development, unlocking talent and potential in those around you and becoming the leader you were meant to be. His intensity and his standard for excellence comes through clearly. Please enjoy my conversation with Strauss Zelnick.

• 2:13Patrick O'Shaughnessy?

  So Strauss, it's hard to know where to begin this conversation because as I was thinking about it, I think you share more specific interests with me than just about any guest I've had, those being technology, investing, media, health. It's hard to pick a starting point, but media certainly has been a through line of your life and career. And I'd love to begin by just understanding why. What is it about the various forms of media, and you've had your hand in all aspects of media's history as an investor and operator? Why does that sector keep drawing your attention and curiosity through time?

• 2:44Speaker 02

  I don't know. I might have an attachment to consistency that's greater than many people. I was always interested in everything creative and I wanted, like many people who work in media and communications and entertainment, I wanted to be a creator and entertainer first and foremost. I didn't really want to be an actor, although I actually did dabble in that when I was a kid. Then I wanted to be a singer-songwriter, then I wanted to be a writer, and then I realized I probably shouldn't be any of those things, but I was still really interested in the creative arts and in creative businesses. And that led me into entertainment initially, and it spoke to me.

• 3:27Speaker 02

  I do enjoy business, just as business. I think I'm better, like many people, when I'm passionate about the thing that I'm working on, and I'm really passionate about entertainment. And then more recently, but still quite a long time ago, technology. And that was more sort of a weird twist on my career, which is a story I can tell you. But initially, I, like many people, I wanted to be an entertainer and a creator, and then realized that I didn't have any talent to speak of.

• 3:55Patrick O'Shaughnessy?

  In the spirit of that twist, I'm curious how you would define the eras of the media business across your career that are most important. I'm guessing that the internet and everything that it brought on media is a key thing, but what are the key inflection points as you think back across the whole history?

• 4:11Speaker 02

  I intentionally created most of those inflection points for myself. I initially wanted to run a movie studio. But people weren't exactly lining up to hire me to run a movie studio. So I got the only and best job I could get in entertainment when I graduated from school, which was to work in sales at Columbia Pictures Television. And I went there as opposed to a consultancy or an investment bank, which were where the other offers came from. Because even though it wasn't overseeing the production of motion pictures, it was certainly closer than working on Wall Street. And the first inflection point was I did well in selling television programming. I learned how to sell. And I was recruited to go to another company in the entertainment business

• 4:55Speaker 02

  that was growing rapidly and was interested in my becoming a senior executive there. So that was the first inflection point. That took me from television into home entertainment. And then that company started a movie studio and I was responsible for that. So that took me to motion pictures. And lo and behold, I was running my first motion picture studio. Then I was recruited to run 20th Century Fox, which included motion picture production and distribution and some television and worldwide home entertainment distribution. So at that point, I was broadening my remit, both in terms of production and distribution. So it sort of happened partially because of what I wanted,

• 5:37Speaker 02

  partially because of serendipity, partially because of opportunity. And the story about technology. So I met Columbia Pictures, and this is a really long time ago. And new media was just coming along. Now, new media in those days, because we're talking about 1983 to be exact, was, believe it or not, pay television and video cassette distribution. The dawn of the age of home entertainment. And it wasn't the dawn of pay television, but it was early for pay television. So those days, the biggest part of the entertainment business, the sexiest part, was motion picture production. Everything else was ancillary. And anything that was new media was really ancillary. So all the big traditional studios would look around

• 6:20Speaker 02

  and they would choose their least important executive to oversee new media. And that was me at Columbia Pictures. They gave me a great gift. I was responsible for pay television and home entertainment at Columbia Pictures, which were these tiny little businesses. And I realized intuitively that the future was new media. And it was known as new media then. And I became expert in those, even though they were very small businesses. By becoming expert in those, first of all, as those businesses actually grew rapidly, I had the opportunity to manage them first at Vestron, which was the company I went to after Columbia Pictures, which was at the time the leading independent distributor

• 7:00Speaker 02

  of home entertainment and became the leading independent motion picture company for a short period of time. And that also brought me more responsibilities at Fox, where all the new media stuff also reported to me. So when an opportunity came along years later to join a pre-revenue video game company, I was already steeped in all things new media related. And I had religion on video games, certainly not for everyone, but for many people who were working in Hollywood.

• 7:28Patrick O'Shaughnessy?

  One of the interesting themes that I became obsessed with in media, I got from Peter Chernin, actually, I don't know how much you overlapped with him at 20th Century.

• 7:34Speaker 02

  Well, we were colleagues for years and then I worked for him for the last six months that I was at Fox.

• 7:39Patrick O'Shaughnessy?

  I love his beautiful idea of content to commerce, this investing concept that he's based the Chernin Group on. And as I've studied the modern media landscape, it seems like so many of the best business stories are some form of content tied to some adjacent business model that isn't necessarily just straight line paying for content. And I'm curious how you think about that trend in the internet era, maybe outside of it. Video game seems like a special case because everyone is willing to pay 60 bucks or 100 bucks for Grand Theft Auto. But it seems like other straight line content businesses, maybe Netflix as the exception, have struggled. It's just like a really hard business model. Do you agree with that? What do you think about just pure content as businesses today in this era?

• 8:23Speaker 02

  If the content is valuable enough to consumers, they will generally pay for it. But even in video games, half of our business is mobile. Mobile is free to play and people are not paying for that initially. They want to install the game for free, be able to play the game for free. And then some portion of the audience, less than 20%, may be willing to pay to upgrade the experience. And it's generally not 20%. So there are numerous examples in the history of entertainment where the content was not valuable enough to the consumer to be paid for, but valuable enough to be consumed. That's why we have advertising businesses.

• 8:58Patrick O'Shaughnessy?

  Do you think that anything is fundamentally different about that equation today than early in your career?

• 9:04Speaker 02

  Not really. Everything's different in the expression, but...

• 9:09Speaker 02

  The underlying concept is the same. So even in the beginning of my career, there were advertiser-supported businesses that brought people audiovisual content, free over-the-air television.

• 9:20Patrick O'Shaughnessy?

  When you think about what it takes to be successful in the media business when you're not the creator of the thing, so when you're not the director, the game creator, whatever, what lessons could you draw from your experience working with so many different media businesses? What does it take to do well as a media business operator?

• 9:38Speaker 02

  It all depends on the job that you're in. For many people, for many operators, you have to actually be good at creating things. Even if you're not the actual creator, you're the producer. So you pull together all the creators and all the elements and perhaps the marketing, and you make things happen with regard to the product itself. That's not really what I do because I became a chief executive really early in my career, serendipitously and oddly and without regard for the fact that I had no experience and didn't deserve the job. I just got lucky. I sort of skipped over a lot of that and went right to running businesses. Running a business is different, obviously. There are numerous jobs in entertainment that are important for the mission of the entertainment company that have nothing to do with creating the entertainment itself.

• 10:22Speaker 02

  The most important jobs, of course, are the ones that create the entertainment. Those are the only people who really matter in the entertainment business, so they're people who create the hits.

• 10:31Patrick O'Shaughnessy?

  You remind me of my favorite part of my conversation in this format with Peter, which was talking about working with James Cameron on a couple of those huge films. And then one of the questions was, what is the best way to work with talents like that? And maybe Rockstar is a great example of, obviously, the biggest game out there, people building this brilliant thing as creatives. And the lessons you've learned about working with those people to protect them in such a way that they can do their thing and also manage the business, on the other hand. It seems like those two skills sit next to each other. Peter had all sorts of interesting thoughts about that, and I would love to hear your take on working with all sorts of creatives and how to do that well.

• 11:08Speaker 02

  So first, one size does not fit all. My approach and style is different than Peter's, for example. And different than many other people who've had great success. So people like Jeffrey Katzenberg, for example, I think the way he's succeeded in doing that is that he's intimately engaged with the creative process, he's intimately engaged with the creative ideas, he's intimately engaged with story, and I am not, because I don't have those skills. And so the way I engage with talent is different because it's a reflection of who I really am and what value I can legitimately bring to bear and the talent that I choose to work with. Jim Cameron's a great example for me because he was not interested in my creative point

• 11:53Speaker 02

  of view, just to be clear. And I knew enough about myself to know that I couldn't add any value. It's not like Jim Cameron needed my help. Thank you very much. So what he really needed was support and empathy and kindness and enthusiasm and encouragement. And he occasionally needed help navigating the waters when there were budgetary concerns or timing concerns. I think probably the thing that I'm best at, I'm not sure it's a skill, but it's served me well, is that I seem to have an ability to identify genuine talent in other people, whether that's creative talent or executive talent. I seem to be able to tell the difference between the real deal and not the real deal.

• 12:34Speaker 02

  And I also seem to have some ability to engage people in a common mission to encourage the highest degree of quality and performance and to create enthusiasm for a shared vision. And then I'm good at getting that out of the way. I don't have any fantasy about my own talents, and I'm okay with that. And there are a couple of areas where I think I have some expertise and I'm fine sharing those. But I found that identifying the top talent and persuading them to work within your organization and then encouraging them to seek perfection and pursue their passions is actually an unusual set of skills in the entertainment business.

• 13:19Speaker 02

  And a willingness to put one's own ego to the side. Not too many people are willing to say, as I will, I didn't have anything to do with that hit. And I say that because it's true. I'm really lucky. I've run every kind of entertainment organization that there is, and during my tenure, 100% of the time, our team has had the highest hit ratio in the business. And this is reasonably well-known. And the reason I'm comfortable saying those words, first is because they're true. But secondly is because, and I didn't have anything to do with their creation. Nothing whatsoever. I did have something to do with creating an environment that made that possible. And I mentioned the selection of talent and the engagement with talent. And I think the other piece is, and I don't think this is like any terrific or rare skill,

• 14:04Speaker 02

  but I am good at running a rational organization that's appropriate, highly compliant, efficient, organized, sound at making decisions, and calm, and well-financed. So I'm able to say to a creator, "Look, this is a safe place to work. No one's gonna raise their voice. No one's gonna let their ego interfere with what you do, myself included. No one's gonna take credit for what you do, myself included. We're not gonna do anything crazy on your watch. We're not gonna go make-up. You're not gonna be fighting off silly announcements. And I'm not gonna be on page six. None of that's gonna happen here. And by the way, we'll be kind to you. And if you have issues, whether they're business or personal, I actually am here to help and I genuinely care about you as a person. Genuinely.

• 14:48Patrick O'Shaughnessy?

  And you'll be the star, it sounds like.

• 14:49Speaker 02

  And they, the creators, the creators will be the star. I'm not even in the backseat. I'm in the caboose. And that also is consistent with my personality. I don't wanna get credit for something I didn't do. That's not who I am. I guess I wouldn't mind credit for something I did do. But I really don't want credit for something I didn't do.

• 15:07Patrick O'Shaughnessy?

  Do you have a favorite example, thinking back on the various episodes of Talent Spotting, that you think is the most emblematic of this kind of whole arc of seeing something early and then creating that space for the creator to do their thing?

• 15:18Speaker 02

  I wish I could say it's Talent Spotting, because that would be better for my career if I could say, "Wow, I was just walking down the street. There was Sam Hauser, and I was like, 'Sam, you should be in the video game business.'" So it doesn't work that way. I think I've been fortunate enough that people were either in organizations that I took over, or people were introduced, or people were already working in an adjacent area. This is not like me spotting some unknown talent, saying, "You should be a star." That's crazy anyhow. The people I work with were fully established people with strong backgrounds, who had paid their dues elsewhere in most instances. But what I did do is... Give them a reason to work within the enterprise that I was part of when they might not otherwise have done that. For example, I'll tell this story even though it's a bit out of school.

• 16:04Speaker 02

  So Greg Thomas runs Visual Concepts, which is the company inside 2K, which is a division of Take-Two, that makes our sports games. And self-serving, but I believe it's true. Visual Concepts makes the very best sports games on the planet and Greg leads that team. And Take-Two is a very troubled company when my team took over in 07. And I went out to visit with Greg, who worked in Northern California, because he was one of the most important people to come in, even though our sports business was tiny in those days. And I remember sitting in my temporary office out there and Greg, who is an adult and self-confident and real smart, came into the office and he said, "I've heard you're a decent guy and I imagine you have some interesting plans for trying to make this a better company,

• 16:49Speaker 02

  but I've had it and I want you to know I'm leaving and there's nothing you can say. Please don't even try. It would embarrass both of us. I've just got to move on. I cannot do it here anymore." And I said, "I hear you. I understand. I know exactly what you're saying. I'm gonna ask you to do something for me." And he said, "What's that?" I said, "I'd like you to give me three months. Just give me three months. And if at the end of three months you feel like it's a lost cause, you can go with my blessing. But in three months, I'd like to be able to show you that this is a kind of organization that you could be happy working in." And he thought about it. He really didn't want to say yes. And Greg could work anywhere and could have at the time. And he said, because he's a good guy, he said, "Okay, I'll give you three months." And Greg is still running Visual Concepts today, 17 years later.

• 17:32Speaker 02

  MBA 2K is the number one basketball title and he has numerous other titles, like WWE 2K, PGA Tour 2K, and many other titles that have been hugely successful and continue to be successful in sports. There was something about the nature of that engagement at that time that caused Greg to stop and give me another chance. I do think had I come in and said, "I, Strauss, am like really great at this stuff and I know everything. I have some wonderful ideas for your basketball game and here's a magazine that I was on the cover." And here's where I went to school. Had I handled it that way, which is some people's style, but not mine, he would have left.

• 18:12Speaker 02

  Or had I said, incidentally, I want to let you know that I think your strategy or your execution or whatever is lousy and I'm going to give you some ideas to fix it. I have learned, and I learned the hard way, to break no glass initially and to listen first and err on the side of treating people with great respect. What was the hard way that you learned? So I had this pretty quick progression. I was at Columbia Pictures for two years and I got promoted to become the youngest VP of Columbia Pictures. I got recruited to Vastron and within nine months became the president of Vastron, which was already the largest independent. And then it was only three years after that when I was recruited to become president and chief operating officer of 20th Century Fox and I was 32 years old.

• 18:54Speaker 02

  And I thought I had pretty well figured this business out, but I completely missed that being president of a large independent in those days was utterly meaningless to the major motion picture business. It was lost on me that I had no real relationships in Hollywood because I had worked on the East Coast, because that's where Vastron was headquartered. I didn't realize, because I wasn't self-aware enough at the time, I came in with no credibility and I thought that the business card, the title and the office was the credibility I needed to succeed. And Fox was a turnaround. It was in the last place at the box office.

• 19:28Speaker 02

  Had a bloated operation and its international operations were no good. And Rupert Murdoch and Barry Diller were dead set on turning it around, which is why they brought me in. They did not bring me in as a caretaker. I had a big brief of stuff I needed to get done. I just went in assuming I know what to do, which I did, and other people will rely on me to do it, which was not true. Barry and Rupert were relying on me to do it, no one else was. And I didn't think that not having relationships or not being known or getting to know people was even relevant. I just thought, hey, guys, this is business. We're here to do business. So I showed up despite the fact that this is Century City in August, wearing my Brooks Brothers suit. I'm not kidding. And polished shoes. This is long ago, so I was wearing suspenders and a necktie and to say that I didn't read the room.

• 20:14Speaker 02

  lies that I bothered to look around the room. I thought, no, that's irrelevant. I went all guns blazing. I was going to change everything all at once. And you know, the thing is, I was right about a lot of it. I was right about almost all of it. But it was irrelevant because my tone and approach was completely wrong. Years later, I had a business coach named Gloria Hen, who's retired now. She was a phenomenal business coach. And she said to me, you're really good with the words. You're not always so good with the music. So I showed up with the song sheet, but I forgot about the music. I just had the words. And I was really ineffectual because the entire organization just seized up against me, even though I was the president. And I nearly failed. I nearly got to a point where I was so incapable of getting anything done that the fact that I was right and I had all the right ideas didn't matter.

• 20:59Patrick O'Shaughnessy?

  Maybe I'd love to zoom forward with that. I love the words music concept and apply that to those first three months after you had the conversation with Greg.

• 21:06Speaker 02

  The good news is for me is that I'm very self critical and I don't mind criticism and I really did want to succeed and I needed to succeed. And the other news is I don't default to being defensive and I tend to err on the side of taking responsibility. Basically, when I realized what I had done wrong, took a beat, I actually sat in Barry Diller's office. I said to him, I made a horrible mistake about how I approached this. I didn't bother talking about all the things that he or others could have done to support me or help me because what's the point? I took responsibility for the mistakes I made and got a chance to do a reset. And I did do a reset. That led to great success. These stories don't have all happy endings. I was burdened the whole time I was at Fox with how I chose to enter.

• 21:52Speaker 02

  And I had to work long and hard to change the reputation that I built and I had to learn a different way of approaching things. The good news is I wanted to do that and that was okay. I also read a book.

• 22:04Speaker 02

  at the time, anytime I ' m asked about this, I talk about it. And I ' ve always been a big reader. I remember in those days there was no internet, never mind Wi Fi on airplanes. And I flew all the time back and forth wherever I was going. So, in those days you read on planes and I liked reading. I was heading actually back to New York, I remember. And this was right about the time that I had this crisis where it was clear I was either going to figure it out or I was going to fail at Fox. And so I was in the bookstore at the airport. Remember when airports had bookstores? Looking for a book to read and I couldn ' t see anything to read. So I like scanning the shelves and I see How to Win Friends and Influence People by Dale Carnegie. And I thought, I ' ve heard of that. That sounds so goofy and lame, but I don ' t know, maybe I ' ll just pick it up. I read the book.

• 22:49Speaker 02

  It is in fact the best book on salesmanship and leadership ever written. And I just swallowed the book, hook, line, and sinker. And it changed my life.

• 22:57Patrick O'Shaughnessy?

  Which principles from the book were most impactful?

• 23:00Speaker 02

  I ' ll save you the trouble of reading it, although you should read it if you haven ' t. Anyone should who ' s in business or in sales. But the principle really is, take a sincere interest in other people. With emphasis on the word sincere. Stop thinking about yourself. Think about others. Put yourself in others ' shoes first and foremost, if you want to get along in the world. Draw other people out. Care about other people. Serve other people. So the title of the book really is against it, because the title sounds like how to be the most popular boy in the class, right? It ' s not very compelling.

• 23:33Speaker 02

  But the content of the book really is how to sell and how to lead. And those principles are principles I try to follow to this day. And I did spend a lot of time in sales and I still do. we raise funds, for example, at DMC. I have to sell. And how do you engage people in a selling environment? You try to meet their needs. How do you know what their needs are? You ask them. You listen. You don ' t try to sell against them. You don ' t try to convince them to have other needs. You try to meet their needs. And it ' s true in leadership as well. And that took me to complete the diatribe, for which I apologize, took me to working with creative talent because ultimately you ' re leading a particular kind of person to try to create hits.

• 24:15Speaker 02

  And to do that, you have to be of service to that person. And you have to be of service to that person in the way that they need to be served so that they can bring their genius to the table.

• 24:27Patrick O'Shaughnessy?

  Just one more question on the Fox episode. So whose shoes did you most need to be in to fix that problem and play the right music and get through that bad first impression?

• 24:37Speaker 02

  Everyone's. There's no one I don't care about. I care about everyone.

• 24:42Patrick O'Shaughnessy?

  Well, I'd love to zoom forward and hear the investing story in 2007 to the beginning of your engagement with Take-Two. You said earlier it was a broken business at that time. So in what ways was it broken? And why, with your investor hat on, was it an appealing project to work on before we get to actually what you've done there?

• 25:00Speaker 02

  Let's see. The chairman had been indicted. The CFO was under criminal investigation. The company was under criminal investigation. The company was also under investigation by the IRS, the SEC, and the New York DA's office. The company had fired its auditors, failed to file financial statements, canceled its annual meeting. It had one product, the Bane Bunny, the Grand Theft Auto franchise. Everything else lost money. It had revenues the year that we took over of around 700 million in its core business. It was an ancillary business we sold. It was losing, I want to say around $100 million a year on that. It had $50 million in cash. It didn't have any debt, which was a good thing.

• 25:44Speaker 02

  And it was probably six months away from bankruptcy. Apart from that, it was in great shape. What was appealing was it was in the interactive entertainment business, a business I knew well because I'd gone to Crystal Dynamics as the pre-revenue CEO and that company had been successful. And I'd started BMG Interactive and that company had ultimately been sold to Take-Two. So I knew that business at least, and I understood the dynamics of the business. And I had a pretty good sense that interactive entertainment was well positioned for growth. Moreover, I had a sense that not only did this company own the Grand Theft Auto franchise, which was huge, and I felt could be more huge, and I knew they had an iteration in the works that would generate a lot of revenue and cash. But I also had a sense that some other things that were going on that probably could be improved, for example, basketball, their sports business.

• 26:29Speaker 02

  And the business itself, the industry was dynamic enough that I was pretty sure we could create other intellectual properties that would be successful. There were things I didn't like, too. At that time, the interactive entertainment business was still highly cyclical, driven by hardware replacement.

• 26:46Patrick O'Shaughnessy?

  Oh, sure, console cycles and everything, yeah.

• 26:48Speaker 02

  And I didn't like that part of it. It was still a seasonal business, it was primarily a holiday business. It had a lot in common with the toy business, which wasn't great. And there were still economic order quantity issues around some of the business, less so than previously in the old days when it was a cartridge business, that was a real problem. So it wasn't like everything was great. And the other thing I found compelling is I liked doing turnarounds. And when a company is out of trouble, it's not like you think you can make it worse. In other words, I was pretty sure that whatever I did, it couldn't be worse. Anything was going to be up from there. That's what led us to Take-Two in '07.

• 27:25Patrick O'Shaughnessy?

  And maybe you talk about the deal itself. It sounds to me very much like a mismanaged gem. There was this sort of diamond in the center of this big rough, all the issues that you laid out. When you were approaching a situation like that with your investor hat on, how did you think about pricing and deal structure and the role and all those things?

• 27:41Speaker 02

  Well, we didn't really have to because the reason the deal was compelling to us was it had a plain vanilla Delaware unamended charter, which enabled one to show up at the annual shareholders meeting and take a floor vote. And in the event the floor vote went in your direction, you could fire the entire board and the management team and take over the company. And that obviously usually isn't an option, but the company had been so poorly managed that the stock had fallen to the hands of professional investors and hedge funds, who were desperate for new leadership. And under SEC rules, we were allowed to go solicit up to 10 holders. And we did, and we spoke to 10 holders and asked them to vote for us at the annual meeting,

• 28:26Speaker 02

  and we got 88% of the vote. That's never happened before since. So we didn't have to price the deal because we didn't write a check. We had to pay our legal Fees and had we not gotten the company, we would have eaten those legal fees. But we didn't actually own a share of stock. We couldn't because had we owned stock, we would have been running the risk of creating a group when we spoke to other shareholders. We didn't want to do that, so we didn't create a group until about three weeks before the annual meeting. And the group was only held together for about a month. As I said, we won with eighty eight percent of the vote.

• 28:55Patrick O'Shaughnessy?

  And talk about the decision to slightly take your investor hat off and become chairman and CEO slowly over time. There's a lot of really interesting stories like this where investors become involved with the business and then ultimately end up operating them. So very famous ones, of course. But what was your thinking? What influenced the decision and the transition from one to the other?

• 29:15Speaker 02

  Remember, I've been an operator my whole career. So I wasn't a professional investor who became an operator. I was a professional operator who became an investor. And when we started ZMC, the idea was that we would invest and operate. I had been CEO of the first company. We bought it at ZMC, which was Columbia Music of Japan. And I was executive chairman of other businesses inside ZMC. So it wasn't that much of a stretch. My then partner and co-founder of ZMC, Ben Feder, was the CEO of Take-Two. I was the executive chairman and I was not the CEO and I was not planning to become the CEO. And I only became the CEO four years later in two thousand and eleven, when Ben decided to take a leave of absence for personal reasons for a year.

• 29:59Speaker 02

  And I, at that point, had to step in as CEO.

• 30:02Patrick O'Shaughnessy?

  Now I want to go back to that three month chunk after your conversation with Greg. So what happened in those three months that made Greg check in and decide to stay on for seventeen more years?

• 30:11Speaker 02

  Probably have to ask Greg. He didn't even remember the conversation the last time I mentioned it to him. I promise it did happen. We went in and we started doing rational things. So we settled with whatever authorities we could settle with. In other instances, the settlements took longer and we just started making sound decisions. And the prior management had made so many poor decisions that the difference was really night and day. And we were tested by the people who were at Take-Two. We took over on a Friday morning and Friday night at ten o'clock, there was a huge crisis at one of the labels. And I had to step in and solve that problem over the weekend. I think that crisis was largely manufactured to test whether I could. And I did.

• 30:54Speaker 02

  What had happened was one of our labels had an interesting intellectual property that A Hollywood studio was about to infringe upon, basically try to steal. And the company that was trying to steal it in Hollywood were populated by old friends of mine. And I called up and said, you gotta stand down. It's a fun story. I'm not going to tell you the name of the intellectual property, but they were going to infringe and make a movie and steal it and let us go fight them. You can't protect titles in Hollywood. Titles are not protectable. So they basically took the position, you can't protect the title, so we're going to make a movie based on this IP, which was legacy video game IP, because Take-Two owned a lot of legacy video game IP. Historically, with Take-Two, it did in those situations, they immediately filed lawsuits.

• 31:38Speaker 02

  They had lawsuits galore. I don't do that. Take-Two is now a 27, 28 billion dollar enterprise. We literally have two lawsuits pending, and they're with patent trolls. I don't have a choice. So that's not how I operate. If I'm wrong, I settle. If I'm not wrong, I never settle. Generally, that keeps you from having to pursue much litigation, especially because we're not wrong most of the time. People know that if I'm not wrong and you want to sue us, you'll be in court endlessly. I will use every resource I have, including non-economically, because if I'm not wrong, I'm not settling. And once you make it clear that if you're not wrong, you're not settling, people don't bother you. The spurious lawsuits go away. At that time, they had zillions of lawsuits, because it's not how they operated. So the team had actually called me at 10 o'clock in front of them, saying, this is going on in Hollywood. Someone's going to steal this intellectual property. So we're going to file a lawsuit.

• 32:21Speaker 02

  I was like, wow, no, we're not doing that. That doesn't make sense. Let me see if I can get them to stand down. So I called my friend who was at the studio and said, this is a bad idea. You really shouldn't do this. And they were like, ah, we can do it, and we're going to do it. I said, I'm really asking you not to do it. And they said, well, that's very nice, but sorry, we're going to do it. And I said, I said, why don't you go think about it, because it's a mistake. I went to law school, so I actually know something about copyright and trademark laws, it turns out oddly. And I'm not going to bore you with all the intricacies of law, but the bottom line is, you can use any title you want, but if you use the underlying intellectual property, that's a violation. And it's hard to take a title of something and make something that's basically derivative and then claim it's not derivative. That's quite difficult to do. This studio was doing it because Take-Two was a laughing stock.

• 33:05Speaker 02

  To the extent anyone cared about Take-Two, it was a laughing stock in the business. This was the game that couldn't shoot straight. They didn't think anyone serious would do anything about it. So they got a call from me. They at that point knew like someone serious was in charge at least. But then I called back the next day and I said, listen, I'm really suggesting you don't do this. And they said, well, are you planning to sue us if we do? I said, actually, no, here's what I am going to do, though, just so you understand. I'm gonna let you go ahead and invest seventy five million dollars in the movie that you want to make on this. And about two weeks before you release the movie, I'm going to go to court. And based on your infringement of the underlying intellectual property, I'm going to get an injunction and you won't be able to release it. That's actually what I'm going to do. Now, the people who were hearing this call had seen me in action before. They knew what I did and didn't do. They knew I don't threaten people.

• 33:48Speaker 02

  They knew I actually do know something about intellectual property law. And they knew that's exactly what I would do when I said it. And they knew that there was a really significant risk that we would win that injunction and they stood down. So that was on Sunday. So on Monday morning, I was able to say to the label in question, we got that problem. Problem solved without litigation. Without litigation, without any money spent, without any press articles, without any noise. And the word sort of got around, oh, this guy maybe isn't a complete idiot. It was exactly the opposite of what I did at Fox. I didn't go in with let me fix these ten thousand things. I went in and said, how can I help you? They had a problem. I solved the problem. And we did a bunch of that. We did a bunch of problem solving. And we didn't do things that would annoy people unnecessarily.

• 34:31Speaker 02

  We had to reduce the cost profile of the company. I've done that many times. Most people, when they reduce cost profiles of companies, they take them over. What's the first thing they do? Just cut people. Yeah, they fire people. It's the first thing they do. That's the last thing we do. You know what the first thing we do is? We get a list of the top ten vendors to the company. Because all companies have vendors who supply goods and services to them. We get the list of the top ten and then we go to the top ten vendors and we renegotiate their contracts one hundred percent of the time. We can usually save a material amount of money doing that. We go back to the team and we're like, look, we just saved fifteen million bucks a year just by renegotiating contracts. And people are like, wow, that's pretty impressive. Oh, and by the way, we didn't fire a soul. And then we're like, let's go a little deeper internally and see what other efficiencies we can find.

• 35:14Speaker 02

  And then we find another whatever, five or ten million dollars in the case of a company the size of Take-Two. And we do that for a couple of months. And only after we've searched in every corner for every efficiency we can find, do we actually have to do the inevitable headcount reduction, which we do once, we're honest about it, and then we move on. By the time we got to the headcount reduction, most of the people at the company were like looking around saying, I can't believe you didn't fire that goofball yet. These are obviously a company that's failing, does not have a first-class staff. And we were there long enough to know who was good and who wasn't as good. By the time we're actually doing the headcount reduction, people are like, thank God you're letting that person go. They shouldn't have been here anyway. And they're not looking over their shoulders wondering if their job is next because we tell them, look, we know enough to know we're like one and done.

• 35:58Speaker 02

  That's just typically how we go about cost reduction. We cut $40 million out of the annual expenses of their company in six months. I don't think we'd completed that in three months, but in six months we had. So it became clear to the Gregs of the world, and there weren't many of them to take to, that, okay, they're not dumb. They're not terrible people and they seem to be making pretty sound decisions. I don't think they said, oh, my God, this is the A-team and I'm so glad. Wow, I just love Strauss. I can't wait to have a cocktail with him. And it was none of that. It was, okay, on balance, these guys are not so terrible and they're making reasonably intelligent decisions. I think that's probably what people said.

• 36:35Patrick O'Shaughnessy?

  Do you think that most businesses, if you went through this same exercise of calling vendors and just looking for low-hanging fruit, could materially reduce? It seems just like a feature of businesses that this inertia builds up. And I'm curious if that's true and if so, why?

• 36:48Speaker 02

  It wouldn't be all businesses. But remember, we're talking about a failing business. A successful business? No. In the ordinary course, they're doing this. We're actually at ZMC. We just walked away from a deal because the company was pristinely managed and we didn't think there was much we could do to improve matters and was fully priced. It was hard to create a return. We see companies all the time where they're well-run and that includes their vendor management programs. And no, if I said to you, yeah, just give me any company and I'll fix it, that would be the height of arrogance. Actually, I think it's harder and harder to find turnarounds. In a market like the US because private equity actually as an asset class has injected a lot of efficiency and a lot of best practices into enterprise.

• 37:29Speaker 02

  And in the 1960s, you could find incredibly sloppy businesses with very sloppy business practices. You don't really see that anymore. When I started my career, you would still see companies where they owned assets that were off topic and their balance sheets were screwed up and some simple choices would clean things up. I looked at a company, now actually I can't say the name of the company. When I was at Vestron, actually, my boss, Austin First, was a wealthy individual and he was interested in perhaps doing some private equity, we can call it that in those days. And so my corporate development team, John Eastburn and David Friedenson, found a really interesting asset, which was Dunkin' Donuts. It was a public company, but it was still controlled by the founding family up in Massachusetts.

• 38:13Speaker 02

  And it was ridiculously successful and the family had gotten very undisciplined, I should say, about how they spent their money. And so they had resorts, planes, huge asset creep and it was very lumbering and inefficient. It was a screaming bargain. The market cap of the company was like $350 million and it was clear to us that you could like triple the EBITDA essentially overnight. And we tried to take it private. We failed because we just weren't experienced enough to pull it off. But we did put it in play, someone else bought it and that's exactly what happened. And within a couple of years, it was worth $3 billion. You don't see deals like that anymore. They just don't exist. They've been driven out of the marketplace.

• 38:54Patrick O'Shaughnessy?

  It's fascinating to think back on my quantitative days. One of the hardest to explain empirical phenomenon was that companies that had the largest percentage growth of their assets were the worst performing companies in the market. And those with the greatest reduction in their assets were the best performing. And that was independent of all the other things that worked in quantitative investing. And it just goes to show, like this asset creep thing, maybe it's less true today because of private equity.

• 39:17Speaker 02

  I think it is less true. I think you don't tend to see really messed up companies anymore. We do now and then and we still are happy to take those companies on. But it's relatively unusual compared to some of the stuff we saw. About the beginning of ZMC.

• 39:30Patrick O'Shaughnessy?

  Coming back to the video game business, I remember a conversation I had with one of the best video game investors ever, Mitch Lasky from Benchmark, and he talked about this notion of it being this hit-driven business. But that in fact, when you really studied it, it was now dominated by what he called forever games, games like IP in games which just lasted a really long time. And the franchises that drive Take-Two's enterprise value for sure fall in that category. These games have been around forever and certainly it's hits-driven and the sets that GTA matters greatly to your business. But I'm curious what it's like running a business with such a key set of franchises underneath it. What is the tension between embracing the concentration of the portfolio, so to speak,

• 40:12Patrick O'Shaughnessy?

  and a desire or a want to diversify? How do you think about which strategy is better? What are the pros and cons of that spectrum?

• 40:22Speaker 02

  We think you need to do both. If you only focus on your winners, unfortunately, they are not forever. All hits eventually do degrade, all being a bit of an overstatement. I don't think Grand Theft Auto is ever going to go away and I don't think James Bond has ever gone away, as long as they're treated well. But pretty much everything else has a decay curve. And so if you only bet on your winners in perpetuity, you run the risk of burning the furniture to keep warm. And that's a mistake because then you've nowhere to sit and eventually you're burning the siding of the house. We always invest in new intellectual property and that's why today I think we have 16 franchises at Take-Two that have each sold at least 5 million units in an individual release.

• 41:05Speaker 02

  Then that's up from one when we took the company over in 07. The riskiest part of the business, it's costly when you get it wrong. And it's tempting for a management team not to do it because you could take the position that it's not going to matter on my watch. Now, I expect to live forever and I like what I do, so not expect it on my watch does not a good rubric for me. I've been at this for 17 years and I want to keep doing it forever. But also, even if I did look at the world that way, I build all my companies for forever. And this is true at ZMC as well. We know we're going to sell a company within 10 years of buying it because our fund documents require us to do so. But we're building that company for 20 or 30 years. And we do that because it's the right thing to do.

• 41:51Speaker 02

  Because our stakeholders are not just our financial investors. They include our colleagues at the companies, include our customers who deserve the best and need the best if they're going to bring us their wallets. So we've always been willing to invest beyond our hold period. You of course do get paid for that, too. If you deliver a buyer phenomenal company, you're going to get a multiple that reflects that. If you deliver solidity and permanence or something close to permanence, you're going to get paid for that. But it happens to be consistent with our DNA and how I like to look at the world. But it is true that if I were just cravenly selfish and said, you know what, I'm going to get out of Dodge in five years, no matter what, come hell or high water, five years from now, and I just want to have the maximum share price when I get out, yeah, stop investing

• 42:36Speaker 02

  in new IP, period.

• 42:37Patrick O'Shaughnessy?

  Any guiding principles for what IP is good versus bad versus great? How do you think about the quality of IP as you explore those opportunities?

• 42:47Speaker 02

  Bottom line is derivative IP is generally speaking not going to be hugely successful, but could be moderately successful at certain times. I never liked doing derivative IP. That's when you notice in the film business, there are three movies being made about Robinhood at the same time. All huge hits are by definition unexpected. Good example, interactive entertainment is Red Dead. Before Red Dead was released, conventional wisdom in the interactive entertainment business was westerns don't work, period, full stop, westerns don't work. Red Dead comes along completely unexpected, spectacular production values, really something no one had seen. Spectacularly beautiful and emotional, and no one had seen it before, and it was a huge hit.

• 43:30Speaker 02

  Example from my recorded music days was conventional wisdom when I was at BMG, which was one of the major label groups, was the boy bands don't work. And Clive Calder brought out Backstreet Boys. And conventional wisdom was that girl bands don't work. And then we had Britney Spears and Christian Aguilera and keep going. Conventional wisdom was that rock and roll was dead for a period of time, then RCA Records brought out Dave Matthews. The list goes on. And in motion pictures, conventional wisdom was that comedy has to have big stars and big concept. And then we brought out Home Alone, starring Macaulay Culkin, who no one knew.

• 44:13Speaker 02

  And that was the highest grossing comedy of all time. The biggest hits are by their nature unexpected. Which means that you can't organize around them with AI. So I'm not worried about AI eating our collective lunches in the entertainment business.

• 44:29Patrick O'Shaughnessy?

  So the key is unexpected and original. You said something which gives me my excuse to ask you about the world of health and fitness. A shared passion of ours for sure. You wrote a book called Becoming Ageless and you said just a minute ago, you expect to live forever. Talk me through the source of your interest in this area because I've come to believe that a good foundation of health is actually one of the smartest things you can do if you want a great business career. Because the energy that you bring to bear is a huge part of your success or failure. So tell me your story about getting interested in this. What was your entree? Why'd you write the book?

• 45:00Speaker 02

  I think my entree into this was just purely vanity. I started aging, I thought, I just want to keep looking good as long as I can. And then I think it just became a game. Can I do this thing at a high level even as I age? And then it turned into a community and that made it just incredibly powerful. So it started from this very unimpressive place of vanity, got to a challenge and then it turned into a big part of my social life, which is I have this tribe of athletes that I train with who are of all ages, but they skew very young. And I train highly competitively in that group despite my advanced age. And I feel great. I feel like I'm 25. I know I'm not 25. I know I don't look 25, but I do feel that way.

• 45:45Speaker 02

  And I don't just feel that way physically. I feel that way emotionally, spiritually and creatively. And I got really turned on to this notion of health span and fitness when I saw the effects of getting engaged in taking care of yourself by going to the doctor, taking care of yourself by eating reasonably well. I don't have a hugely strict diet, but I eat reasonably well and I'm not overweight. Taking care of yourself by getting lots of exercise and taking care of yourself by having a spiritual practice and a community. And all of those things together have brought me a really good life and a life that I want to keep engaging in. I wrote the book because about seven years ago, because my good friend Dave Zizinko,

• 46:30Speaker 02

  who had been editor in chief of men's health, said, this is amazing. You're in your late 50s, knocking on the door of 60 at the time, and you're in great shape. You look good and you need to explain to people like how this is possible. And becoming ageless really does not take the position that you're not going to age or you're going to age in reverse, tempting as it would be to take that position. But rather that you have an opportunity to be your best self without regard to your chronological age and that you can do a lot of things for a really long time despite aging. I don't believe it's possible. I'm not one of the Silicon Valley guys who believes in I'm going to live to 150. To the contrary, actually, there's very little evidence that anything I'm doing really changes your lifespan much. Maybe you change your lifespan by about five years on the outside.

• 47:15Speaker 02

  There's a lot of evidence that you change your health span. Peter Attia was my doctor for four years. He wrote the foreword to the book. He and I share a view that health span is what matters. And if Peter were sitting here, he would not say, oh, Strauss is in great shape. He's going to live to be 105. First of all, he'd acknowledge he didn't know how long I'm going to live. Secondly, he would acknowledge that everything I'm doing and I do what he recommends maybe gives me five more years. And that's barring some kind of getting ALS or something that I could get without knowing I'm going to get it or having a horrible accident. I could walk outside and get hit by a truck. I hope I won't, but I could. And I got really engaged in this and I thought if I wrote a good enough book, then maybe I would help other people.

• 47:56Speaker 02

  And that goes back to my view that one of the most successful parts of my life has been driven by being of service to others. The book actually sold really well and sold well over 100,000 copies. I continue to run it to people who say, I read your book and I lost 30 pounds and I feel great.

• 48:11Patrick O'Shaughnessy?

  What has been the most surprising aspect of this part of your life? A lesson you learned or something counterintuitive about the way you now live your life with health span in mind that maybe you wouldn't have expected when you were 30 or 25 or something?

• 48:25Speaker 02

  I certainly wouldn't have expected at 30 that I would be 66 years old and my primary training buddy is 24 and we trained at the same level and he's a fitness model. And that he chose to have me as his primary training buddy. That wouldn't have occurred to me. It wouldn't have occurred to me that this morning I trained with 10 incredibly fit people and I was right there. With them, the oldest person in that group was probably thirty-two. And it wouldn't have occurred to me that I could feel this way. When I was thirty, sixty-six was really old. And it didn't occur to me that I could feel the way I feel at sixty-six or still be standing straight up and still be the same height I was when I was eighteen and still be the same weight. I'm wearing the same size clothing I wore thirty years ago.

• 49:10Speaker 02

  And that I'd feel the way I do, I feel amazing.

• 49:12Patrick O'Shaughnessy?

  Do you think that that transfers in meaningful ways over into other aspects? Maybe business most specifically?

• 49:17Speaker 02

  It transfers into leadership because I think showing up feeling good and presenting yourself as the best version of yourself is compelling to other people. It helps you lead. Showing up looking like you had some weird surgical procedure to look thirty years old is not going to be a benefit. My face looks my age. Give me a few years maybe, but you don't see me and say, oh, my God, this guy's thirty years old. You see me and say, maybe I'm gonna get really lucky. You say, maybe this guy's in his late fifties. That's how I ought to look. I'm not trying to look different than I am. And if I were, that would be terribly off-putting to people, as you would expect. But I think it is compelling when you show up and you're reasonably well-dressed and it doesn't mean you have to spend a lot of money on clothing,

• 49:58Speaker 02

  but you're together and your clothing is clean and it fits you and you have a haircut. Your skin is not gray and ashen. You don't smell bad. And all of that stuff actually does matter. And I think it's a sign of respect for yourself and respect for others to show up as your best self. And that does include how you present yourself physically.

• 50:17Patrick O'Shaughnessy?

  Who's the best leader you've ever seen?

• 50:19Speaker 02

  I'm really fortunate. I have a lot of mentors. They have different characteristics and it takes different qualities. There isn't one approach. The best I haven't seen, but I think many people would agree, was one of the great leaders of all time was George Washington and Abraham Lincoln. Actually, were great leaders. Washington particularly was known to be an amazing leader. And I've read a bunch of presidential biographies that I've seen. Dick Parsons was a great leader. And he too truly cared about people. He's also super smart and he makes really sound decisions. Dick Parsons was CEO of Time Warner. He's one of those people who could synthesize huge amounts of information and arrive at the right conclusion, who is politically savvy without being a political person.

• 51:01Speaker 02

  Have to get up really early in the morning to get over on Dick Parsons, but never had a negative word. Always had a smile, always engaged with you as though you were the most important person in the room. He was a phenomenal leader, but there are so many of them. In the private equity business, Don Gogel, again, a person of modest demeanor, quiet confidence, a brilliant person, he's got a great brain, a truly kind person. Barry Diller is a great leader, very different style and a very tough style and not to everyone's liking, very much to my liking. He was a pretty critical boss, but I'm really critical of myself. And I knew when I was 32 years old and I was president of Fox, I knew I didn't know anything. And I told you where I almost failed. I was not unaware of the fact that

• 51:44Speaker 02

  I was nearly failing. This was very obvious to me. So having a really smart boss who understood the entertainment business better than anyone else and was prepared to teach that to me and would engage with me and he had the patience to engage in robust debate. It was amazing. And I used to say like I would argue with him all the time. And I don't know, 98% of the time he was right, which is incredible because I am reasonably intelligent and well versed in what I do. So what does that mean? Because I'm not insecure about my intellect and I was aware of my lack of experience, what it meant was I realized I was going to school and this person was willing to be my teacher. Not sure he'd see it that way. I imagine I caused him no shortage of frustration, but he was an amazing

• 52:26Speaker 02

  leader. He got the best out of me. He got the best out of a lot of people. He had flaws and has flaws. We all do. My style is quite different than his, but was his style and is his style effective? Highly effective.

• 52:39Patrick O'Shaughnessy?

  You bringing him up makes me wonder what you think the role of boldness is in leadership.

• 52:45Speaker 02

  In the absence of intelligence, there is no good role for boldness. And we've seen that with people. I think having conviction when you know something and that something is rooted in the facts is valuable. I think having conviction when you don't know something, but you just believe it is magical thinking and is very dangerous. We do need to, as leaders and decision makers, be willing to take in as much information as we can within reason, synthesize the information successfully and arrive at a conclusion and then more often than not, we better be right. And in those situations, you do have to act with conviction. There was an executive who was brilliant, I'm not gonna say his name, at Fox. I think he understood the entertainment business better than almost

• 53:28Speaker 02

  anyone else. He was well known too. And certainly, he was as brilliant about the entertainment business as Barry. Was and is, but he was a lawyer by training and he didn't like making decisions. So he would equivocate and he would at times just analyze and equivocate so much that the moment would pass. So what I learned is you do have to decide. You got to decide. That's what you're paid to do. And the hardest thing I do is make a decision when everything's unclear. What I'm willing to do is, if you have been able to tell from this conversation, is I'm open minded. I want to listen to others. I care about their opinions. I have no trouble saying that I'm wrong. I have no trouble changing my mind when there's new evidence.

• 54:11Speaker 02

  But when we've agreed upon a course of action or in certain limited instances, I've decided on a course of action, I know you have to have conviction and you have to pursue it to the end.

• 54:21Patrick O'Shaughnessy?

  Decision making under uncertainty is a fascinating topic area and I'm curious how to zoom it in on take two specifically, how you've thought about technology's role through the introduction of new platforms. So you had the console cycle that you rode for a while, then there's mobile and obviously you own Zynga now, so you have a mobile free to play presence. There's other looming potential platform shifts right now, a couple of them that are fascinating. How do you think about and approach those things as both risks and opportunities for the business and the franchises?

• 54:52Speaker 02

  We stay away from huge pronouncements and massive shifts in the absence of market evidence because if you own intellectual property that matters, you can be late on a platform and still be just fine. You don't have to be the first to the party with a marketing idea or platform support, although we often are. You don't really get paid for that. If you're in the content business, you get paid for the content. I'm a believer that in business, if you don't have to vote, don't vote. If you don't have to make a choice, don't make that choice. Keep all your options open and we try to be where the consumer is. We try to use every distribution method that we can. We try to be ubiquitous. We're not the kind of people who think about,

• 55:36Speaker 02

  if I shut down all of this over here and I have that, I can drive more margin there. I'll worry about how to get the consumer there. We think about, let's have the broadest possible business. Let's meet the consumer where the consumer is. Let's drive margin where we can and acknowledge that in certain other instances, as long as the margin's acceptable, it may be a bit inferior to margin in other areas. But on balance, we want to have the largest possible pie.

• 56:00Patrick O'Shaughnessy?

  If you think about the whole business, what is something that people believe about Take-Two to be true that isn't true?

• 56:06Speaker 02

  I think these days, pretty much, people have gotten the memo. I think there was a period of time where people believed that my stated desire to be a friend's talent, combined with our decentralized approach, meant that I had no clue what our labels were doing and they would just tell us what they're doing and then we would have to live with it. And that completely misunderstood what actually goes on, which is we have a highly communicative and deeply intertwined senior management team across label and corporate. And we have a lot of creative independents at the labels and frankly, independents among executives because people are given jobs to do and then we want them to do their jobs the way they see fit.

• 56:50Speaker 02

  But we have lots of communication. I'm a fan of saying I believe in delegation with communication. Among the most dangerous words you can say at a corporation are, "I don't care how you do it, just do it." That's great. That's how you end up being noncompliant. That's how you end up tanking your company. That's how you over-leverage your company. That's how you go bankrupt. That's how you go to jail. I do care how you do it. I really care how you do it. You have to do it in the right way. It has to be consistent with our strategy. It has to be consistent with our culture and it has to be legally compliant and ethically compliant. And everyone knows that. But I do believe in delegation. I just want to know what's going on. And when there's a problem, I want to be the first call. The first call. I am including the middle of the night. Even recently, I will occasionally have people

• 57:35Speaker 02

  inside the organization. Now, we're a big organization. If you include ZMC, it's a very big organization. And I let people say, here's what's going on. I'll be like, when did this come down? And they'll be like, a week ago. And I was like, and I didn't know about it? And they're like, we didn't want to just show up with a problem. We want to show up with some solutions. I was like, that is a really great thing that you thought about. I want to know about the problem. You don't have to show up with a solution. I want to know about the problem. I need to know. Can't be surprised. The other thing is if you want to have that kind of communication in your organization, then you can't shoot the messenger. You can't be a screamer. You can't be hysterical. You can't react. I've gotten some really bad business news in my career, like really bad news. And I don't think I've ever raised my voice at bad news. I don't think ever.

• 58:19Speaker 02

  And I've gotten some really bad news.

• 58:21Patrick O'Shaughnessy?

  If you think about the video game production process, which now for something like Grand Theft Auto is an enormous, multi-year, incredibly expensive, like a great feature film or something. What contrast would you draw from seeing that happen to also seeing other great, big media things get built, whether that's a film, or a show, or a record, or any other form of media? What to you is most interesting and distinctive about the production of one of these really big franchises?

• 58:47Speaker 02

  That so many people work on the project and that the project is largely created in a computer. Not entirely. We have motion capture, we have voice actors, we have physical actors. It's a multi-year project and the bulk of the creative work is digital. And that's very different than recorded music, which is, unless it's dance music, electronic dance music is really largely analog, converted to digital. And motion pictures and television, which is still entirely analog, unless it's an animated movie or special effect. That's very distinctive. It also makes it harder and it requires other skills. One of the reasons that Hollywood talent has been translated to interactive entertainment is you actually have to have a certain kind of technical education to work in interactive

• 59:30Speaker 02

  entertainment that you do not need to work in filmed entertainment or television or music for that matter.

• 59:36Patrick O'Shaughnessy?

  If you think across the business's history, when you've been a part of it, does a defining moment pop to memory?

• 59:42Speaker 02

  Oh, so many defining moments. But usually defining moments for me are when I've gotten it wrong. When I went to Crystal Dynamics, I didn't understand anything about the characteristics of the interactive entertainment business. So I'd been recruited to go to this company and Crystal Dynamics was started to make 32-bit games for a new platform called 3DO. And I didn't realize, and this is amazing to say, but it's true, that there were different platforms. forms, interactive entertainment. I came from movies. When you made a movie, it's not like you could put in Regal cinemas, but not national amusement cinemas because they had different equipment. Or worse, that you needed a license from Regal or National Amusements to actually exhibit a movie on their technology. But that's how the interactive entertainment business works.

• 1:00:27Speaker 02

  I show up in Silicon Valley, first day at work, thinking that we're making potentially the best hits because that was the story that I was told when I was recruited. It was like, we're going to make the highest quality stuff for this rapidly growing medium. And then I realized within a day or two that we were only making it compatible with 3DO. And then I was like, so tell me, what's the install base of 3DO? And the answer was, it's zero. I was like, oh my God. I've taken my entire career. You're looking at the only person on earth who's ever voluntarily stepped down from the job of president of a major film studio. I've done that. I didn't get paid or anything. It's not like I got fired and got paid. I walked away without getting paid and walked away from my bonus that year. And then I took my entire net worth and invested it in Crystal Dynamics stock. Wow. I was the largest shareholder. I was a bigger shareholder than Kleiner Perkins.

• 1:01:09Speaker 02

  And had taken our wealth, my family's wealth, which was de minimis, but it was a few bucks. Yeah. And now you're telling me that we could put out the games we're working on now and no one might be able to consume them because they have the wrong equipment? Oh my God. First fail. This is like day three on the job and I called up the folks at Kleiner Perkins and said, we need to become a multi-platform company. And they were like, no, you're going to make games for 3DO. I said, yeah, we're going to keep making games for 3DO. But if 3DO fails, I don't want us to fail. So we can't have that as dependencies. We're going to have to make games for other platforms. They didn't like that very much. By the way, 3DO did fail. It was strategically sound that we did this because I have two losses in a row as opposed to just one.

• 1:01:47Speaker 02

  And then my next fail. So then I was like, okay, great. I'm going to go see in those days Sega and Nintendo and explain that we're going to make games for them, not knowing that they had to agree. I didn't understand that notion. So I go meet the president of Sega, who is an old friend of mine, luckily. And I said, we'd like to a license to make games for you. At this point, I figured out day four, like you need a license. Okay, we'll see. Calls me back the next day. Says, turns out you recruited one of your two co-founders from Sega. And so the team here really isn't very interested in letting you have a license. No. And we went to Nintendo and said, there's the other big platform player. They said, "Okay, thank you very much." They were Japanese and polite. "We'll get back to you in a couple of days." They called back a couple of days later. "We just realized that all of your engineers have been recruited from Nintendo,

• 1:02:31Speaker 02

  so we don't think we're going to give you a license." So I'm like, "Oh, my God, second fail. I'm stuck at 3D. Very fortunately, Sony had decided they were going to get into the video game business right then, and they didn't have any third parties. Third parties are companies not owned by the hardware purveyor, who make titles for the system in question. Luckily, the new head of Sony Interactive was an old friend of mine, Olaf Olafsson. This is like day six. I flew to New York, meeting with Olaf, thankfully, and said, "Here's what we're doing at Crystal Dynamics. We'd like license to be your first third party." And he was like, "You know what? This looks interesting. I trust you. We know each other. Done. I'm sending over dev kits." And by day seven, we were a multi-platform company. And thankfully, we were, because, again, 3D got launched. We sold a few units. We had a couple of bundles. We did okay.

• 1:03:17Speaker 02

  But we were a Sony supplier. Obviously, Sony's PlayStation's been hugely successful. What do you want the business to be? First of all, our strategy from the beginning has been and remains to be the most creative, the most innovative, and the most efficient company in the entertainment business. I wish I could say we were all those things. We're not. We still aspire to be those things. I think on good days, we're the most creative, but not always. And certainly, there are other very creative companies. On good days, we're the most efficient, but not always. We have work to do. And on very good days, we're the most innovative, but that's the area that probably needs the most work, because innovation and efficiency don't necessarily go together. That's what we aspire to do. We would like to be the number one pure play in the space. We're now number three.

• 1:04:00Speaker 02

  If Activision gets bought by Microsoft, we will become number two by default. Still someone ahead of us, so we've got some work to do. And that's not just for bragging rights. You're number one. You probably enjoy a higher valuation, and you probably have even better access to talent. Why is there a difference between creativity and innovation? Innovation is being the first company to get into mobile, not the last. Why is that important? Because if you choose right, you create outsized value. We missed the boat. I missed the boat on that. Now, in fairness, when mobile business was... coming about, we were really still doing a turnaround and we had to focus on our core business, which was console. But it's also true that I greatly underestimated the potential of the mobile business. I don't want to make mistakes like that.

• 1:04:46Patrick O'Shaughnessy?

  Combining that with your earlier answer, is the sweet spot early recognition, wait for some evidence and then be as early as you can be?

• 1:04:54Speaker 02

  Yeah, generally speaking, with creative matters, you have to be at the front of the line. With business matters, you don't have to be at the front of the line. With matters that sort of bridge the two, like AI, you have to be close to the front of the line, but maybe not at the front of the line.

• 1:05:09Patrick O'Shaughnessy?

  And efficiency, what does that mean? That can mean a lot of things.

• 1:05:12Speaker 02

  That means running a really tight ship. That means not having resorts and jet planes and private dining rooms and campuses and security guards and all that crap. We don't have any of that. I'm here today in your studio. I showed up. There's no downstairs with a little earpiece with a notepad saying, Mr. Soundnik, it's time to go. I don't have any of that. It's a big company. It's a $28 billion enterprise. I don't have a staff with me today. I got dropped off and walked into my own power and carrying my own iPad and that's how we operate.

• 1:05:43Patrick O'Shaughnessy?

  What are the things that motivate you? What gets you energetic?

• 1:05:47Speaker 02

  When I was in business school, they had a class that discussed motivation. At that time, they said, there are three things that tend to motivate people in business: money, power, and achievement. And I thought, that's interesting. So money. I definitely was ambitious to make a good living. I didn't come from wealth and I wanted to have a nice life. But I didn't have a desire, and I knew this about myself, for endless amounts of money. I didn't need to be the richest person in my class, never mind on earth. And I didn't find money motivating as a thing of its own. I found money motivating in terms of being able to pay the bills without worry and educate my kids and live nicely. So I didn't think money was my motivation. And I was right about that in the fullness of time. It's not really something that motivates me. Power, definitely not, because first of all, I don't think business executives are powerful.

• 1:06:32Speaker 02

  I don't enjoy exerting my will over other human beings. I don't enjoy being bossy. And when I found myself engaging in that behavior, I'm not proud of it. And thankfully, that behavior is long in the past. It was sort of adolescent behavior. So I'm not a power focused person. But achievement very much I like doing things. I really like doing hard things. I probably like doing hard things too much. And that speaks to my physical activities. It speaks to my friendships. It speaks to my marriage, my relationship with my kids. And very much speaks to my business career where I chose to do turnarounds that other people would not touch, including Take-Two. And I like to do hard things. I think there's an element of ego baked in there because it's kind of cool to say, I took on this really huge challenge and succeeded.

• 1:07:16Speaker 02

  And my business career frankly does have a lot more success than lack of success in it. I've had plenty of stuff that went wrong, but never lost money on a deal. I've never failed to repay debt. I've always created value for shareholders and I'm really proud of that. And some of those deals have been incredibly hard. So I tend to be motivated by achieving hard things.

• 1:07:35Patrick O'Shaughnessy?

  What do you think of the notion of a masterpiece? Do you think you've had a masterpiece?

• 1:07:39Speaker 02

  I think I have enough, I would say humility, but it's simply just awareness of reality and to know that I'm not living in masterpiece land. I think some of the products that we put out are masterpieces, but they're not my masterpieces. They're our creative folks' masterpieces. And I get to tag along and enjoy the fruits of that labor, but they're not mine. And maybe if there were masterpieces in my life, it would be some of the relationships I have, which are so meaningful to me. And in certain instances, when I've been able to help people achieve their own personal or professional goals, and I wouldn't talk about them because they're private to those people, but probably the things, if I'm proud of anything, would be proud of pride in that.

• 1:08:23Speaker 02

  And that's probably where also I've been able to make a real difference. But some of the masterpieces, yes, there's some really cool deals that I've been involved with and really cool properties, but all that stuff's ephemeral and deeply ephemeral. Whereas the stuff that I've focused on that matters, I probably can't quote or wouldn't quote to you. And if I did, maybe it wouldn't even mean anything to you, but it does mean something to me. Helping other people achieve their potential, helping other people live great lives, helping other people do interesting things, helping other people... Become happy and productive. If I have something that was my own masterpiece, it would be that. And then I've done a couple of cool things along the way that I'm really proud of, but probably not going to talk about them.

• 1:09:05Patrick O'Shaughnessy?

  What are the most common things that people need in support in the way you just described? I'm not asking for the specifics, but when you think about what resources or whatever it is that somebody needs to attain their potential in the way you described earlier, are there most common ways that people need a certain thing?

• 1:09:23Speaker 02

  There's this tachny term now, people want to be seen, but the truth is that people want to be understood and people want to be acknowledged and people want to be cared for. And I actually really care about other people. I really care about my friends and my family and my teams, genuinely care about them. And people know that. And I will move heaven and earth to help them achieve their ambitions. And they know that too. And then I do that. I don't just talk about it, I actually do it. And I do it without noise or smoke or flourish or congratulations. I just take it on. It's my job, I do it and I do it, I think quietly and with a sense typically of grace and kindness.

• 1:10:05Patrick O'Shaughnessy?

  I have young kids of an age that has me thinking about this a lot. If I were to ask your kids, what mattered most to you as a parent? What do you think they'd say?

• 1:10:14Speaker 02

  First of all, I have a great relationship with all three of my kids. But if they were candid, it's not like they would sit here and come up with a lot of superlatives. Okay. I think they would say that excellence really mattered to me. And I think they would say that integrity mattered and pursuing their passions mattered to me. But I think they would probably arrive at the conclusion that excellence really mattered.

• 1:10:37Patrick O'Shaughnessy?

  Thinking back to Carnegie's book, the like my traditional closing question for everybody. What is the kindest thing that anyone's ever done for you?

• 1:10:44Speaker 02

  I lost both of my parents when I was a kid and my aunt and uncle took my siblings and me into their home and raised us as their children.

• 1:10:51Patrick O'Shaughnessy?

  One of my very closest friends, his father lost his dad when he was 15 in Africa. And they had to make a choice to take over the family business, which was one of the early safari lodges. And so at 15, him and his brother took this thing over and effectively birthed. It's the Vardy family birthed modern safari as it's known. And I'm curious, if you're willing, I just would love to hear how that shaped you. Because I've talked to Dave Vardy, person in question, about this. And of course, it's two very different sides. There's very good things and very bad things. And I'm just curious how much you would attribute to having sadly deal with that at a young age.

• 1:11:30Speaker 02

  I think great loss when you're little, and I had multiple childhood losses, all by the age of 10, lead to one of two things typically. One is a sense of victimization and that can really lead to a pretty failed life. Or a sense that I'm going to work really hard to overcome this. Or really hard so this doesn't happen again, or really hard so I'm not at risk. And I think that's where it took me, which is I was already a bit of a perfectionist. And I think that that put a fine point on being a perfectionist, which was challenging for me personally, but frankly professionally a good thing. I hate to say it, but it's within reason. It stood me in good stead and out with a lot of work. I think I've balanced that out. So for me, it was sad and a motivator. And I think it also caused me to see life as potentially temporary.

• 1:12:16Speaker 02

  I was in a hurry because I thought, wow, things could really change and not change for the better. And it also, because I did come from that, I did err on the side of empathy for others. I think I was more inclined to feel empathy for other people. I think you could go in the other direction if you're like, hey, I got the short end of the stick, so screw you. But that was not my way. I thought challenging things occur in people's lives. Most people have tough things in their life, but at some point, almost everyone. So I think it brought me to a place of great ambition and also turned me in the direction of empathy. But it took me a while to get there. The ambition and perfectionism loomed large for probably the first 35 years of my life. And then with some measure of success, because things came relatively early to me.

• 1:13:01Speaker 02

  And a lot of personal work, I reached a point of bringing out probably some of my finer qualities and maybe mitigating some of the qualities that were driven by this childhood baggage in a negative way.

• 1:13:13Patrick O'Shaughnessy?

  Strauss, this has been such an interesting conversation. I'm really appreciative of your time. Thanks for sharing everything you did today.

• 1:13:18Speaker 02

  Thanks for having me.

• 1:13:20Patrick O'Shaughnessy?

  If you enjoyed this episode, check out joincolossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week. [Music]