Strauss Zelnick, Take-Two Interactive

Strauss Zelnick has spent 40 years doing the same thing: finding where new technology is about to supercharge an old business, and getting there first. He started at Columbia Pictures in 1983 running international TV distribution. When the company needed a "new media" person, they looked for the least valuable executive they could spare. That was Zelnick. New media in 1983 meant VHS cassettes. He took the assignment anyway. By 2001, when he started ZMC, he had one thesis: technology would supercharge media and destroy it simultaneously, and the only companies worth owning sat at that intersection. In 2007, he used it to take over Take-Two Interactive with no money. The company had a chairman under indictment, four government investigations, and six months of cash left. Zelnick had written memos for Carl Icahn twice saying stay away. Then Icahn told him to read the bylaws. A plain vanilla Delaware charter allowed a board replacement if a majority of shares physically present at the annual meeting voted for it. Zelnick met the 10 hedge funds holding 70% of the stock, got commitments, walked in thinking he had 48%, discovered most had loaned their shares to short sellers, and won with 88%. The only asset worth keeping was GTA. His pitch to creative talent: we will fund your vision, stay out of your way, and run a company where nobody gets indicted. Market cap when he arrived: $700 million. Today: roughly $35 billion. Show notes: https://www.davidsenra.com/episode/strauss-zelnick Made possible by Ramp: ⁠https://ramp.com⁠ Deel: https://deel.com/senra Chapters (00:00:00) Hostile Takeover With No Money (00:01:29) Becoming the New Media Guy (00:03:58) Lessons From Entertainment History (00:09:44) Why Hollywood Feared Games (00:11:52) Fox Turnaround and Barry Diller (00:20:54) Rupert Murdoch and High Stakes Calm (00:26:20) Taking the Leap to Crystal Dynamics (00:38:04) Bootstrapping Without Capital (00:43:57) Carl Icahn Connection (00:47:01) Take Two Proxy Coup (00:56:36) Turnaround Cost Cutting Playbook (01:01:37) Leading Creative Geniuses (01:06:24) Rationality Beats Magic (01:07:54) Borderlands Bet (01:09:28) GTA Timelines Pressure (01:11:22) Specific Goals Visualization (01:21:34) Service Leadership Mindset (01:31:52) Media Versus Entertainment (01:34:22) AI Productivity Reality (01:36:08) Why Hits Surprise Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:02David Senra?

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

• 0:09Speaker 01

  You know, interesting, it's not a story that we've told. And part of the reason is, stories like this tend to be sort of self-serving because it worked out well. And not everything works out well. In fact, most deals don't happen, and deals that do happen don't always work out. This one did. It's kind of a set of one of one. The way we did this deal has never happened before, and I'm pretty certain it will never happen again. Because we essentially did hostile takeover with no money. The reason we did that is, we had no money. So it was really our only choice. But I had a background in the video game business and started ZMC with partners. And the goal of ZMC was to buy, in certain instances, turn around, and in all instances, build up and create value

• 0:53Speaker 01

  in companies that stood at the intersection of media and technology. And the idea in '01, when we started the business, was that technology would supercharge media and create lots of value and destroy value. And of course, that's a story now that's more resonant than ever. I thought in '01 it was pretty obvious, but it was not obvious to the entertainment business.

• 1:15David Senra?

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

• 1:21Speaker 01

  About that, yeah. And I've been in every entertainment business there is.

• 1:25David Senra?

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

• 1:29Speaker 01

  I was the new media guy. So my goal getting out of grad school was to run a movie studio. An old business even when I graduated from grad school. So I got to Columbia Pictures in a very junior job. It was the only job I was offered, and by definition, the best I could get in the entertainment business. I was responsible for international television distribution, which was basically the last stop on the train of distribution of film and television. In those days, there weren't many outlets. With motion pictures, you went cinemas. And then you went to the beginning, the very beginning of home entertainment, the very beginning of pay television, the very beginning of cable television, and eventually free television. And my job was to distribute to free television.

• 2:12Speaker 01

  So I'm sitting around, and new media has come along to the entertainment business. In those days, believe it or not, new media was home entertainment, which at that time was video cassette distribution and pay television.

• 2:24David Senra?

  And this is in the 80s?

• 2:25Speaker 01

  This is in 83.

• 2:27David Senra?

  Okay, so that's new media in 83.

• 2:29Speaker 01

  So that's new media.

• 2:30David Senra?

  A term still used all the time, 50, almost 50 years later.

• 2:32Speaker 01

  Amazingly.

• 2:33David Senra?

  Yeah.

• 2:33Speaker 01

  So, big companies like Columbia Pictures, which made their money in film and television production and distribution, and were really old line companies who were just beginning to modernize. I was one of a small cadre of business school grads who'd been recruited into the business, which was atypical for the industry until the early 80s. So they realized, like, we need a new media guy. Like the way today, everyone needs an AI guy, or AI, you know, army. And so they looked around, and they're like, who is the least valuable executive at this company that we can put in charge of new media? And that was me. So in addition to my day job, I became responsible for new media, which was the best thing that ever happened to me. Because I'd always been a futurist. My thesis in grad school was a history of the electronic entertainment business from its inception in 1895,

• 3:18Speaker 01

  until when I graduated in 83, and I've tried to stay current since then. So the notion of looking ahead sort of came naturally to me. But now I had to do it for my job. Oh, and I had to deliver revenue in that job as well. So that was my initial exposure to new media. And actually, if you look at my career, it has been the combination of traditional businesses and new businesses driven by technology, which is why this is such an exciting time with all things AI.

• 3:46David Senra?

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

• 3:53Speaker 01

  Don't you have to be a futurist by looking back?

• 3:55David Senra?

  So, wait, you started back in 1895. What was happening in 1895? Who were you studying?

• 3:58Speaker 01

  The very beginning of electronic entertainment, recorded music, beginning of motion pictures.

• 4:02David Senra?

  What is the record, the beginning of recorded music is phonograph?

• 4:06Speaker 01

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

• 4:18David Senra?

  I'm more interested in like what insights you were deriving from the past? And then how you thought it was, you were applying them in the 80s?

• 4:25Speaker 01

  So, there are many insights, obviously, and we can go into them, you know, one after another. But the, the insider guess that spoke to me that probably helped me the most was, you always have to embrace new technologies. If you fight against them, you'd be left behind. Number two, and I've said this to all the companies I've been at, most human beings are wired to believe that which is going on now will never change. But the actual state of play is exactly what is going on now will change. It will always change. For example, people, whether they like it or not, think today's political environment is what it is. If they like it, it's going to stay forever. If they don't like it, they're moaning that it will stay forever. But it won't stay forever. It'll change. The economy will change.

• 5:10Speaker 01

  And media and entertainment will change. And because I've always been wired that way, I was able, when I started ZMC, to make sure, I have an idea, let's not buy legacy businesses that are under pressure. Remember, this is '01, so it was non-obvious. Like, let's not go into the movie business. It's a terrible business, you know, as a business. It's fun creatively, but as a business, it's a bad business. Let's not go into deficit network television production. Just a bad economic business, different today than it was, but it was really bad then, where you, you would deficit these shows in hopes of creating enough episodes that you could syndicate them. And if you didn't get there, you had a massive loss. And if you occasionally got there, you had a huge hit, which is what motivated everyone. But it was, you know, the economics looked a lot like winning the lottery. But I don't win the lottery. How about you?

• 5:55David Senra?

  Yeah.

• 5:55Speaker 01

  But that's not my life experience. But there are many other lessons as well. But the biggest lesson, I think, is that New things come along and they can grow. Old things in the media and entertainment business take a really long time to die. Sometimes they don't. Sometimes they stay in the business forever. Sometimes they come back.

• 6:15David Senra?

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

• 6:21Speaker 01

  Home entertainment, which was basically video cassette distribution, which became DVD distribution, which became digital distribution.

• 6:29David Senra?

  Which was a tiny market at that time that drastically expanded.

• 6:32Speaker 01

  It was just beginning to boom in the early eighties.

• 6:34David Senra?

  And you were an early believer in that?

• 6:36Speaker 01

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

• 6:42David Senra?

  Okay, so tell me about that.

• 6:44Speaker 01

  Well, I'd been very fortunate at Columbia Pictures. I figured out how to double the division's revenue in six months, which was good for my boss's career and therefore good for mine. So I became the youngest vice president at Columbia Pictures and then I was recruited. I got sort of reputation for like, oh, this guy figures stuff out. And I was recruited to a company called Vestron, which was then the largest home entertainment company that had ambitions to become a diversified entertainment company, which was also my ambition. You know, just refreshing the conversation from earlier, I wanted to run a movie studio. Vestron wanted to start a movie studio. So I left to go to Vestron where within, I think about, pardon me, about nine months of arriving, I became president.

• 7:26Speaker 01

  So I was now president of a public entertainment company and I was 29, three years out of school. It was not my expectation. And then I had this, you know, ability to take on the new movie division that hadn't actually made any pictures yet. So it was very early. I didn't start it though. I got there and the team was already there, but I'd gained responsibility for it. And we started making movies.

• 7:49David Senra?

  Go to the new media part though.

• 7:50Speaker 01

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

• 8:07David Senra?

  Would they buy other content made by other people?

• 8:09Speaker 01

  Yes.

• 8:10David Senra?

  Okay.

• 8:10Speaker 01

  Yeah, that was actually how the business started.

• 8:12David Senra?

  That was the majority of the business?

• 8:13Speaker 01

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

• 8:16David Senra?

  And then the idea is, okay, let's, we're already.

• 8:18Speaker 01

  We gotta do this ourself.

• 8:19David Senra?

  Okay.

• 8:19Speaker 01

  In the same way that Netflix started its distribution company and realized how to be in production.

• 8:23David Senra?

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

• 8:29Speaker 01

  Yeah, me too.

• 8:31David Senra?

  One of my favorite things that I've ever heard Strauss Zelnick say was that he said the thing that he's best at is he has the ability to identify genuine talent in other people, that he can tell the difference between the real deal and not the real deal. The presenting sponsor of this podcast is Ramp, and I think there's a lesson in the way they're building their company that is applicable to anyone who's trying to make something great in the world. The founders of Ramp know, just like Strauss Zelnick knows, that you always bet on talent. Ramp has the most talented technical team in their industry. That means when your business runs on Ramp, you have top-tier technical talent and some of the best AI engineers on the planet, working on your behalf 24/7 to automate and improve all of your business's financial operations, and they do this on a single platform.

• 9:15David Senra?

  Ramp gives your business fully programmable corporate credit cards for your entire team, automated expense reporting, bill payments, accounting, and more, all in one place. Ramp is the only all-in-one platform designed to make your finance team faster and happier. Many of the top founders and CEOs that I know run their business on Ramp. I run my business on Ramp, and you should too. Go to ramp.com today to learn how they can help your business save time, save money, and grow revenue. That is ramp.com. How did you get from new media is DVDs and home entertainment to, oh, wow, I think I'm gonna have, I have a legion on video games, and I want to like move myself into that industry?

• 9:56Speaker 01

  So I was not a pioneer in the video game business. The video game business started in the late 70s and began to grow in the early 80s. And just by way of background. I was really contrarian about video games because Hollywood had a horrible video game experience, which I'm not sure too many people would remember today. But in 1982, there was a huge hit called ET, and Warner Communications, very forward-thinking, had purchased Atari, which at that time was a leading video game company. And they made both hardware and software. And software in those days was cartridges, and cartridges were expensive to make and had a long lead time. So before you released something, you had to decide how many you're gonna sell and order it all. And if you were right,

• 10:40Speaker 01

  you did great. If you're wrong, you had excess inventory. You didn't have just-in-time inventory with cartridges. It took too long to create. So Warner's has Atari. They're doing well with it. And they have ET, and they're like, we should make an ET game. And because they didn't really have a lot of experience in how video games were made, they basically, they made the game in five weeks and put it in the box. And it was a terrible game. And then they manufactured more games, more cartridges than there were Atari consoles. Not sure what their idea was, but they did. And then it was a disaster. No one bought the game because it was terrible. And there were visuals of the cartridges being plowed into landfill that you can find online today. And the entertainment business is a small

• 11:22Speaker 01

  business. And everyone was like, oh, my God, that nearly tanked Warner Communications. I think they took a write-down in 82 of $400 million, which was a lot of money in 82 for Warner Communications. So the rest of the business is like, this is a disaster. Like, don't ever get involved with video games. It's terrible business. Okay. Roll the clock forward. I've been at Vestron. I made a bunch of hits. The first picture I green-light turned into a huge hit. That was very good for my career. Sometimes, you know, it's better to be lucky than smart. That got me recruited to become president of 20th Century Fox just a couple of years later when I was 32. So now I'm at Fox, and we turned around. Fox went from last place to the box office to first place.

• 12:04David Senra?

  Who recruited you to Fox?

• 12:06Speaker 01

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

• 12:12David Senra?

  Okay. So what was Barry Diller's role at Fox at this point?

• 12:15Speaker 01

  He was the CEO of Fox.

• 12:16David Senra?

  He was the CEO, but then Rupert Murdoch.

• 12:18Speaker 01

  Well, he was the owner.

• 12:19David Senra?

  Yeah, okay.

• 12:20Speaker 01

  He was corp-owned.

• 12:21David Senra?

  Okay. But this was a flat-out turnaround.

• 12:23Speaker 01

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

• 12:29David Senra?

  But you're 32?

• 12:31Speaker 01

  Yes.

• 12:31David Senra?

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

• 12:34Speaker 01

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

• 12:38David Senra?

  We've got a ton of time. Give me whatever version you want.

• 12:40Speaker 01

  So, in those days, imagine like the independent businesses over here, siloed, and the major businesses here, and never the twain shall meet. So, Joe Roth was an independent producer, and he had never worked in a major studio, and he made movies for Vastron. That's how I knew him. He made Young Guns and Young Guns 2 for Vastron, which were hits for us. And he and I became friendly in the way that I am, well, first of all, a friendly person, if you don't know that.

• 13:06David Senra?

  Yeah, I know.

• 13:07Speaker 01

  Secondly, like, when I work with people, I want to develop relationships with them, and he was a highly creative person, a good guy. So, we became friendly, not intimate friends, but friendly. So, I'm now, I'm at Vastron for a couple of years. I've been very worried about Vastron's business model for an array of reasons, and Vastron's senior leadership, the person I reported to.

• 13:23David Senra?

  Does that have anything to do with technology?

• 13:24Speaker 01

  Uh, it had to do with the fact that the reason for Vastron to exist was that they were a pioneer in home entertainment, but everyone else got into home entertainment. You can never have a competitive advantage in the entertainment business through distribution only. That's why Netflix produces content. You can start with distribution only if you're a pioneer, but you got to immediately go into production, and production's a very tough business, as I said earlier. So, Vastron's not capitalized to be a diversified film and television production company with a video game division, sorry, a video store division, not video games. And it's apparent to me they're going to have a problem, so I start looking around and for a job, and remarkably enough, at the age of 31, people are not exactly lined

• 14:06Speaker 01

  up knocking on my door to ask me to be president of a major film studio. But Joe gets this job as chairman of Fox, and behind the scenes, and this I was not aware of... But I became aware of it. Barry said to Joe, "Look, you've never worked at a major and you've never run a business. You're an independent producer." But he needed creative engine to turn around the studio, I was aware of that, which was true. "You gotta hire a business guy to support you here, like to be your partner in building the business." So Joe comes from the independent world, remember? Totally different world than major world. He has no relationships in major world. But in independent world, like, I'm kinda well-known. Like, I'm president of the biggest independent. We've done really well. I greenlit Dirty Dancing, which was the highest grossing independent film of all time then and stayed that way for a very long time until Pop Quiz.

• 14:51David Senra?

  What?

• 14:52Speaker 01

  I don't know. Blair Witch. Many years later. So he's looking around, he's like, "Well, who's the number one guy to be the business guy at the studio?" Now, to say that I wasn't the number one guy, I was not the number 100 guy. I was the number one guy in this little, narrow, independent entertainment business. So he called me up and he was like, "Do you wanna..." Well, I called him, actually, to say congratulations. He said, "Is that the only reason you're calling?" I said, he said, "Might you wanna come here and work here?" I was like, "Coincidentally, yes." And he said, "So, um, do you think you'd be in LA anytime soon?" I'm like, "Yeah, like, House Thursday." And, um, so he's like, "Good." So we meet at the Bel-Air Hotel for breakfast, which was a big thing in those days.

• 15:33David Senra?

  I'm very familiar with that breakfast.

• 15:35Speaker 01

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

• 16:00David Senra?

  No, I'm a little busy.

• 16:02Speaker 01

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

• 16:16David Senra?

  Is that normal for Rupert?

• 16:18Speaker 01

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

• 16:31David Senra?

  What year are we in?

• 16:32Speaker 01

  This is eighty six.

• 16:34David Senra?

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

• 16:38Speaker 01

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

• 16:47David Senra?

  All right. So take me back to your inner room with Rupert Murdoch.

• 16:50Speaker 01

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

• 17:08David Senra?

  But did Barry say you're hired or they just, it was implied?

• 17:11Speaker 01

  No, I just walked out and it was like, yeah, like the HR guy was like, okay, come on. And that was, it doesn't happen that way anymore.

• 17:18David Senra?

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

• 17:25Speaker 01

  Yeah, it's good.

• 17:25David Senra?

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

• 17:29Speaker 01

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

• 17:39David Senra?

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

• 17:45Speaker 01

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

• 18:13David Senra?

  He kind of had that in his career, right?

• 18:15Speaker 01

  He did. And a different way, he, he really came up more on the creative side.

• 18:18David Senra?

  Yeah.

• 18:18Speaker 01

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

• 18:27David Senra?

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

• 18:33Speaker 01

  No, I just remember the form of the discussion, which was a lot of very robust debate with a lot of heat around it. And I used to say to people, you know, we argue all the time, Barry and I, and he's right 99% of the time, but 1% of the time I'm actually right. So that's how I learned from him. And he was patient with me most of the time. But you had to have a strong stomach to... I mean, he was famous and fierce in those days. He was not like junior. He was a very senior in the industry already, never mind what he's done since. And he was scary. Oh, and by the way, like, it's not like if this job didn't work out of Fox or other people lining up to hire me. Like, I was young, I was newly

• 19:16Speaker 01

  married, I had a kid, had a mortgage. Like, I needed to keep my job. But I understood that this was his dialectic. And if you backed down, if you didn't argue, you were done. I understood it wasn't personal. Just wasn't personal. Other people took it personally, like a personal attack or criticism. I just knew that it wasn't. It's not like it was personal on the good side either. It's not like if he were sitting here, he'd say, oh, yes, I love Strauss. I thought he was so amazing. He might not even remember I worked for him in those days. Therefore, I knew it wasn't personal. It wasn't about me. It was about the thing itself, arriving at the right conclusion. And I wanted to arrive at the right conclusion, too. And I wanted to learn. I had some really bad days with

• 19:58Speaker 01

  him, don't get me wrong. And it was very, very taxing. One of the senior execs at the studio was a woman named Lucy Salhany, ran television. And Lucy and I are very close. And we had a so-called president's meeting every Monday, which was Rupert and Barry and all the division heads. And I was in that meeting. And I was, I don't know, 10 or 15 years younger than the youngest, next youngest person in the meeting. And I was the one who would argue. Like, I argued all the time. Many other people were just like, shut up and sit there. And Lucy said, you remind me, remember when you were little and you had that blow up clown doll that everyone had, that you would punch, it would go over and then bounce back up? You remember that?

• 20:35David Senra?

  Yes.

• 20:36Speaker 01

  Everyone had that. I had that. And she said, that's you. You just get punched, you go over, you keep coming back up.

• 20:41David Senra?

  But are you naturally, like, argumentative?

• 20:43Speaker 01

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

• 20:46David Senra?

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

• 20:48Speaker 01

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

• 20:54David Senra?

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

• 21:04Speaker 01

  He was extraordinary. What I learned from him really was in a different moment, which is he over leveraged the company during my tenure there by buying Star. And the company had a real trouble with its debt facility. And my recollection is they had a diversified debt facility with like 150 banks and a whole cross default mechanism. And which was great when things are going well because they kept the interest costs low and horrible if things go badly because the cross defaults. Suddenly things go badly and he was at risk of losing the whole thing. I went on the road show with a bank road show with him for a couple of the visits.

• 21:48Speaker 01

  And what I found remarkable was he was cool the whole time. He wasn't overconfident. He just wasn't ruffled. I mean, he was at risk of losing his whole business, which had been his family's business. And it just didn't faze him. He just kept going. And he was laser focused on the conclusion and he reached the conclusion just by being focused and calm. That's really what I learned from him.

• 22:10David Senra?

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

• 22:20Speaker 01

  So the biggest insight, well, we can get into how I work with creative people because that's probably the most important long term thing. But I think going back to your question about video games. So it's now mid 80s because I've been there for a couple of years. And I now really understand the economics of the movie business. So like, maybe I'm slow to pick it up, but I got it. And they're terrible. They're terrible underlying economics. And they were bad and they've been bad since 1955, since the consent decree that basically disaggregated distribution from production and turned the motion picture business from a studio system into a boutique system. And a rubric for a good versus bad entertainment business is a boutique system is generally bad

• 23:03Speaker 01

  and a studio system is generally good or can be good. The studio system was long gone. And studio system means your creative talent, all your talent is on the payroll. Boutique system is they're not on your payroll. They can auction their services. And obviously talented people are auctioning their services for every project. It's going to be much more expensive than if they're on your payroll in success. So you have a structure in the motion picture business since fifty-five essentially. It wasn't, didn't happen overnight, fifty-five, but by the, by the late sixties, early seventies, mid-seventies, where it's heads I win, tails you lose. If the project does well, the boutique extracts a lot of the value because the deal they were able to negotiate, so they didn't go across the street.

• 23:45Speaker 01

  And if the, if it's a flop, you as the studio bear the entire cost of the flop, obviously. Whereas in the, in a studio system, recorded music before its most recent changes was essentially a studio system. Video games to this day is a studio system. In success, you obviously pay your creative people, and we are incredibly generous in the way that we compensate our creative people for success. But the company also has an opportunity to create a return. I was aware that the economics of the film business were really lousy, and that you can't fight that. There was a Buffett aphorism, which I'm gonna get wrong, but the aphorism was to the effect of, if you take a management team with a reputation for- Brilliance.

• 24:30Speaker 01

  For brilliance, and a, and a business with a reputation for being bad, it is the business's reputation that will stay intact. Yeah. And again, I didn't, I didn't, that wasn't an elegant version, but you get the idea. So I saw, I actually saw this in Forbes magazine, those days you read magazines, it was in the back, remember they had quotes in the back of Forbes? And I, I read, it was like, that's what I'm dealing with here. And I've been really fortunate. Astor did well because we made hits, and Fox is doing well because we make hits, but you can't fight the underlying structure of the business. So I'm, my blinding flash to the obvious was, I thought to myself, see, here's the thing. As it turns out, my ambition had been to run a movie studio, and as it turns out, my ambition should have been to run a movie studio in nineteen twenty-seven, not a studio in nineteen

• 25:15Speaker 01

  ninety-one, whatever it is. So I, I think to myself, what is the moral equivalent of the motion picture business in the nineteen twenties? Without, it's the video game business.

• 25:24David Senra?

  How did you know that?

• 25:25Speaker 01

  Because I was a student of the business and I was aware the video games were a thing. And I was aware that they were, despite the issue that Atari and Warner Communications had, it was still a growing business. And by the early 90s, it was a real business. It was a small business, but it was a real business. And I looked at it, I said, I think this is gonna be huge. And remember, that was a very unpopular view in the entertainment business because of the Atari disaster, which people still saw in bright, flashing neon.

• 25:55David Senra?

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

• 26:04Speaker 01

  Yeah, to your point about being a student of the business.

• 26:07David Senra?

  Okay, so then you have that insight.

• 26:09Speaker 01

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

• 26:19David Senra?

  So what's your next move?

• 26:20Speaker 01

  I went to Rupert and I said, next big business is the video game business. And I remember sitting in his office. And I said, so I think we should be in that business. He said, great, go start one. And I said, yeah, I'd love to do that, you know, while I do my day job, which was now, I've been promoted, I was now running the creative and business side, working for then Peter Chernin, because Joe and Barry both had left. And he said, great, you could do it. We'll give you the capital, you can pursue it, build a video game business. And I said, well, the only thing is like, I see it as an entrepreneurial venture, so I'd like a piece of it. And he said, no interest, like, that's not an offer.

• 26:54David Senra?

  Why do you say no?

• 26:56Speaker 01

  Because Rupert doesn't have partners in this business, except his public shareholders.

• 27:00David Senra?

  Okay.

• 27:00Speaker 01

  And it's just as, you know, there's nothing like, there's nothing wrong with that. It was just his approach. And he didn't pause, but it wasn't like he paused, oh, let me think about it. He was like, no. So I was like, okay, I guess I have to think about, am I serious about this thing? And then coincidentally, I got a call from a recruiter saying, there's a startup pre-revenue video game business in Silicon Valley that is doing the most advanced video games. They're really gonna be the next generation of video games. Are you interested? And I left. I took a 95% pay cut and moved my family from our beautiful house in West LA to Atherton, to a rental house that was going to be torn down. So it was maybe a little dated inside, it was about to be torn down for a golf course.

• 27:44David Senra?

  Because you wanted equity, you wanted ownership in the...

• 27:46Speaker 01

  I wanted to build something and I wanted equity. But primarily what motivated me was... This notion of being at the cutting edge of media and entertainment and the fact that it was driven by technology made it even more appealing.

• 28:00David Senra?

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

• 28:12Speaker 01

  Yes, and I wasn't ready, as it turns out. But I did think that. And I know I wasn't really a born entrepreneur because I was a good employee and I liked running big businesses for other people. But I also knew that if I really wanted to build something meaningful, I had to take a risk.

• 28:27David Senra?

  Why do you say you weren't ready?

• 28:28Speaker 01

  I didn't have much money and I had a young family. And I think there are kind of two stages in life to be an entrepreneur. Before you have anything and any responsibilities and obligations and after you have some protection. And I was right in the middle. I had some responsibilities, I had no protection. So emotionally, it was very challenging for me. And I don't think I was emotionally ready. So I did it for a couple of years. Crystal Dynamics was very successful, not hugely successful, but it still exists today.

• 28:58David Senra?

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

• 28:59Speaker 01

  That was the company that recruited me.

• 29:00David Senra?

  Tell me about the company.

• 29:02Speaker 01

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

• 29:16David Senra?

  And literally, it was a video game studio?

• 29:18Speaker 01

  Yeah. So I set it up, I got some distribution deals, I raised a bunch, lots of capital, because I hadn't raised much capital. And then I was recruited to go turn around a huge record company back in the days when that was not an oxymoron. And I decided I'm really not ready to be an entrepreneur going forward quite yet, given this opportunity. And that record company, which was called BMG, agreed that I could start a video game division inside the company.

• 29:46David Senra?

  Before you took the job?

• 29:47Speaker 01

  Correct.

• 29:47David Senra?

  Okay, because I was gonna say the jump from, you got religion on video games and now we're jumping from video games to music. Why'd you do that? Okay, so...

• 29:54Speaker 01

  Another turnaround, it was really interesting. I'd never done music, and they said I could start a video game company.

• 30:02David Senra?

  Strauss Zelnick prides himself on running what he calls a rational organization. He said that he tells his talent that the company they build will be efficient, organized, will make sound decisions, we will be calm, and we will be well financed. He tells them that no one will let their ego interfere with what you do, and no one will take credit for what you do. We won't do anything crazy, and we won't go bankrupt. I've spent a bunch of time with Adam, who's the founder of AppLovin', and I would describe the way that he runs his business and the way that Strauss runs his business as hyper competence matched with ruthless efficiency. Both Strauss and Adam want to build world-class products, and that is exactly what Adam and his team have done with their advertising platform, Axon. Axon connects you with over a billion potential new customers.

• 30:47David Senra?

  Axon allows you to capture undivided attention. Axon ads are full-screen videos that are watched for an average of 35 seconds. That is retention that blows other ad platforms out of the water, and you can launch in minutes. You set the goal, and Axon achieves it. No complex setup, no expertise needed, and Axon scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scaled to hundreds of thousands of dollars a day in spend, and increased their revenue by millions. So you want to get started quickly before all of your competitors are on Axon, and you can do that by going to axon.ai/cenra. That is axon.ai/cenra.

• 31:31David Senra?

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

• 31:35Speaker 01

  So I hired Jay Moses, who is now on the board of Take-Two, and the model was external development, so making deals with external developers, and we were going to use the BMG Recorded Music Distribution System to distribute worldwide, which was pretty smart because we had this massive worldwide system of local offices, so we could slot right into it without adding any overhead. That was the beauty of doing this.

• 31:56David Senra?

  Say more about that.

• 31:57Speaker 01

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

• 32:10David Senra?

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

• 32:13Speaker 01

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

• 32:16David Senra?

  Were any other music companies doing music and video games?

• 32:19Speaker 01

  No, no.

• 32:20David Senra?

  Oh, that's smart.

• 32:21Speaker 01

  No. So we... We... Put aside a small amount of capital for BMG because in those days BMG's revenue was five billion a year and it was very profitable. And I think we devoted around forty million dollars to investing in this basket of games and building up the distribution system and hiring a team.

• 32:40David Senra?

  Can I pause you there?

• 32:42Speaker 01

  Sure.

• 32:43David Senra?

  At this point, video game, like, there's no free-to-play, there's no, you can't download anything over the internet, right?

• 32:51Speaker 01

  Correct.

• 32:52David Senra?

  So the economics of the video game is very similar to recorded music. It's, you're buying-

• 32:56Speaker 01

  Somewhere between toys and recorded music. It was a top-10 business and most of the sales were in the fourth quarter. It had a lot of aspects of the toy business. And we were, there were still cartridges, it hadn't shifted entirely over to discs. So you had all the messy inventory characteristics of a cartridge business. So it had plenty of hair on it as a business that it no longer has.

• 33:17David Senra?

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

• 33:24Speaker 01

  Oh, sure. No, I knew it was becoming a disc business, absolutely.

• 33:28David Senra?

  You couldn't predict what was gonna happen after discs?

• 33:30Speaker 01

  No.

• 33:31David Senra?

  Okay.

• 33:32Speaker 01

  No.

• 33:33David Senra?

  So go back to where we are in the story, sorry.

• 33:34Speaker 01

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

• 33:45David Senra?

  Yeah, you said forty million compared to revenues of five billion.

• 33:48Speaker 01

  It was like a rounding error.

• 33:49David Senra?

  Okay.

• 33:50Speaker 01

  And he created, his team created a whole bunch of properties. And we're getting ready to distribute some of them as they've been completed. And there was a new CEO, Bertelsmann, the parent company at BMG, whose name was Thomas Middlehoff, and he decided the video game business was a terrible business. And he told me to divest the whole thing. And I said, wait, wait, we've already invested. The only thing left to do is distribute the titles. That's the only thing that's left. So let me do that and then you decide depending on how it goes. And he said, no, just sell it to the highest bidder. I said, but there won't be any bidders.

• 34:31Speaker 01

  It's like in production, um, video games, there's not going to be a lot of appetite for this. And he said, I don't care, just sell it. So

• 34:39David Senra?

  Why?

• 34:40Speaker 01

  He just didn't believe.

• 34:41David Senra?

  Okay.

• 34:42Speaker 01

  He, he was a person who, you know, bet on his gut. It didn't work out very well for him at all, um, at all. That's a separate story for another day. And, uh, so we, we go out to market, not a lot of bids and we find a buyer and the buyer, um, agrees, it's a little tiny public company with a, I want to say roughly a hundred million dollar market cap. And they agree to give us 20% of their company in stock for the business, such as it was. So $20 million. And, uh, so we close that deal. Now we own 20% of this company. And I go to Thomas and I said, listen, we have $5 billion in revenue. Like this is $20 million of stock.

• 35:26Speaker 01

  It's a rounding error on a rounding error. Why don't we just hold the stock, see what happens? So he said, no, sell the stock in the open market. So we sell

• 35:33David Senra?

  What the hell dude?

• 35:34Speaker 01

  Precisely. So we sell the stock in the open market for, wait for it, $14 million. So, um, a month later, this public company launches the first property that we had completed into the market.

• 35:48David Senra?

  Oh no, don't tell, don't say

• 35:50Speaker 01

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

• 35:56David Senra?

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

• 36:01Speaker 01

  Is that I think so, yeah.

• 36:02David Senra?

  Yeah, okay.

• 36:04Speaker 01

  So, um,

• 36:06David Senra?

  Oh my God.

• 36:07Speaker 01

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

• 36:14David Senra?

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

• 36:16Speaker 01

  You know, I didn't own the company and I don't like, I don't get pissed off easily. Like I understood, I'm on the payroll and this is my boss. He gets to make strategic decisions like this. I knew it was a foolish decision.

• 36:27David Senra?

  But how could you think that you were going to work? Did you, maybe you didn't. There's no way if you see this person making decisions like that, that you're like, oh, I'm going to work for this person.

• 36:35Speaker 01

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

• 36:37David Senra?

  Okay. So then what happens next?

• 36:39Speaker 01

  I realized, it's time to go. And now, um, I'm ready to be an entrepreneur. Because I have a vision for what I want to build and I have a few bucks in the banks. My family's not going to starve because I saved well and I made a lot of money, you know, as a professional executive. So I decided to start ZMC.

• 36:59David Senra?

  Explain what ZMC is.

• 37:01Speaker 01

  Well, today it's a private equity firm.

• 37:02David Senra?

  Okay.

• 37:03Speaker 01

  So we raise capital from institutions in funds and then we buy companies and build them and then eventually sell them to create a return.

• 37:10David Senra?

  Okay.

• 37:11Speaker 01

  But at that time, that wasn't the vision. The vision was to create an entity that would build a portfolio of media and entertainment properties that are supercharged by technology. That was the thesis. And again, this is oh one and, you know, I thought it was a pretty obvious thesis, but in retrospect, it was not.

• 37:29David Senra?

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

• 37:32Speaker 01

  Well, yes and no. Actually, I didn't have an appetite to go back into video games when I started ZMC. First of all, I've been there and done that twice. Secondly, it still was kind of a top 10, fourth quarter toy-ish business with bad inventory characteristics.

• 37:45David Senra?

  Because it's 2001.

• 37:47Speaker 01

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

• 37:58David Senra?

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

• 38:00Speaker 01

  We started.

• 38:01David Senra?

  Buying Take-Two stock?

• 38:02Speaker 01

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

• 38:24David Senra?

  So how do you start a company with no capital?

• 38:25Speaker 01

  Exactly. So I put in $300,000 of my own money. I convinced people to work for free. We borrowed offices. We had one fewer chair than we had people and I'm not kidding. The officers were so horrible that if you went to the restroom, like, half the time it was flooding and by flooding, I mean like water sheeting down the walls. I mean, like, you couldn't believe this was actually going on. And I would run around and talk to capital providers, you know, professional financial services firms and say, you know, we're trying to, here's our vision, we're trying to buy companies to build them up and create value. And they'd be like, okay, well, show us the company you want to buy, we'll consider putting capital in. And then I would go to targets, to companies and say, I'd like to buy you. And they'd be like, okay, great, show us the capital that you have to buy us and we'll have a conversation.

• 39:09Speaker 01

  So this is going on for like, for like six months and I'm like, hmm, there is a problem here. Like, you know, empty suitcase and go on a lot of meetings. It became obvious to me that it was an issue when we were at this very fancy private equity firm. And they said the same thing, they were like, you guys are great, you all have great resumes. So we'd love it if you would bring us a deal and, you know, we'll put money into the deal. And we, it was at the end of the day and we're, we're packing up and they've left the room. And there was a cleaning person who's emptying the garbage. And I said to my colleagues, I said, I guarantee you that after we leave, someone who works here is going to go to that person and say, incidentally, if you see a really interesting company, why don't you come talk to us about it, we'll finance it for you. I realized like, these were empty words, they said it to everyone, they were just looking for free options.

• 39:54David Senra?

  Yeah.

• 39:55Speaker 01

  So I had to find this lightning in a bottle where there'd be an opportunity to buy a company with third-party capital. And thankfully, one came along. It was called Columbia Music Entertainment, it was a deeply troubled Japanese record company. And I had recorded music experience. The short story is amazingly enough, we turned it around.

• 40:13David Senra?

  And it was because your idea is to buy, improve and sell.

• 40:16Speaker 01

  Correct.

• 40:16David Senra?

  You're not holding for a lot.

• 40:18Speaker 01

  We did, it took us a long time, it took nine years, but it was very difficult because it was recorded music in the early 2000s. It was Japan, it had a 0.5% market share, it had way too much debt, it had no hits whatsoever.

• 40:30David Senra?

  So wait, how do you, like, because you're saying early 2000s, now you're getting the iPod, now you're getting iTunes. You're getting Napster, it was in 99, why would you even do?

• 40:39Speaker 01

  Those early 2000s, because all has happened.

• 40:41David Senra?

  Yeah, exactly.

• 40:42Speaker 01

  Yeah, so why would I want to be in the record business? Yeah, I didn't want to be in the record business, I was like, been there, done that. I had no interest and it was a really horrible company. So it came about because one of the capital providers that we spoke to is a company called Ripplewood. And there's a partner there named Jeff Hendren and Colombian music had been part of a sort of a two-part company and essentially Ripple would wanted to own the good part and they wanted to find some person like me to run the bad part. I didn't know that entirely, but okay. I was smart enough to figure that out until it was too late. And so Jeff, who I'd had a couple of meetings with, you know, buy a company together, called me up and said, "Here's a perfect deal for you, for your first deal. It's recorded music, which you know. Sure, it's in Japan and they have

• 41:27Speaker 01

  0.5% market share and altogether too much debt and probably there are criminals lurking around." But nonetheless, and so I said, "Well, I know the business because I was in a recorded music business." I said, "It's a horrible company. It's a disaster. Like, don't do this deal." And I'm not doing this deal. So he said, "Okay." A week later, he calls me and he said, "You know, we're still looking at this business. We really think you ought to look at it seriously with us because you'd be perfect for it in your first deal." And I said, "Okay, listen, it's a public company, so I'll pull all the public docs and I'll look at them over the weekend." My partner at the time, Ben Feder, and I spent the weekend poring through the documents. On Monday, I called Jeff and I said, "It's even worse than I thought. Just run in the other direction. Don't do this deal. It's

• 42:09Speaker 01

  a disaster." And he said, "Okay, thank you." Called me a week later. I promise all of this exactly, like, there's no hyperbole. I sometimes can be accused of hyperbole. This is not one of those moments. I remember I'm in my dining room and there's like a wall phone, like, it's a long time ago. This is 01. And he calls and I pick up and he says, "Look, we're going to do this deal. And we really want your firm to take it on and be responsible for building and managing it. Obviously, we've got an upside in the deal." And they would put up the capital. And I said, "Jeff, I told you it was really bad." Then I spent a weekend looking at it. "It's even worse than I thought. Like, we're passing. You should pass." He said, "Can I ask you a question?" I said, "Sure." He said, "Just how busy are you?"

• 42:55Speaker 01

  I laughed and I was like, you make a very good point. He said, I think you should do this deal. So we did. It was the hardest deal I've ever done in my life. It was terrible, terrible. I could tell, we could literally take five hours and I could tell you every horrible problem this company had. But I remembered my experience with Rupert and I became laser focused on just turning it around and getting to the finish line, no matter what it took. Because I realized correctly that if someone gave me $300 million to take over a company and I failed, that would be my last deal. And that's true. That's not dramatic. That's true. No one's giving you more money after that. So we turned it around remarkably enough and got about a 22% IRR in the recorded music

• 43:40Speaker 01

  business in the early 2000s on Herb.

• 43:42David Senra?

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

• 43:44Speaker 01

  That was first EMC deal.

• 43:46David Senra?

  That's incredible.

• 43:46Speaker 01

  And that's how we began to generate income to build up a team, which I reinvested and reinvested and build an enterprise and buy more companies.

• 43:54David Senra?

  So take me to take two.

• 43:56Speaker 01

  All right. So it's 07. We started raising our own capital in 07 and 08. So it's the very end of our being was at that time called a fundless sponsor. Now today they call it an independent sponsor because it sounds much nicer than fundless. But I promise you, we were fundless. So even though we'd done six deals at that point, we had very little capital, very tiny balance sheet. I'd become quote friendly with Carl Icahn. I put it in quotes because he is the man who said, on Wall Street, if you want a friend, buy a dog. But in any case, I had a relationship with Carl. And the relationship took the form of, and I did this intentionally, was I'd go over and visit with him. He's a lot of fun to spend time with.

• 44:38Speaker 01

  And I'd bring him ideas and I brought him an idea initially for something that we couldn't act on, but he could, because he did public markets investing. And he said, listen, I just want you to know, I'm happy to listen to your ideas, but I'm not paying you for them. And I said, yeah, I know. And, you know, I thought to have a relationship with Carl Icahn, you never know where it could go. So I bring him ideas and they were good ideas. And the first one I brought him was actually Reader's Digest. I had a feeling something would happen there. It was underpriced. He bought, I don't know, for him, nothing. He bought like $50 million of stock. It immediately went up. I go over to his office like three months later and I said, "Sell your stock."

• 45:19Speaker 01

  And he made whatever. For him, nothing, but nonetheless, he likes making money. He made like 50 million bucks. Incidentally, at the end of it, he said, "You know, I really, I need to thank you." He said, "I told you it wasn't to pay you." I said, "Yes, you did." He said, "But you know what I'd like to do? I'd like to take you and your wife out for dinner."

• 45:35David Senra?

  Yes.

• 45:35Speaker 01

  I said, "Thank you. That's great." So Wendy and I go for dinner with him and his wife, Gail. He only went to two restaurants in those days. A Japanese restaurant, a Chinese restaurant, I've forgotten the name of, and an Italian restaurant called Il Tinnello, which was good food, actually. And Wendy and Gail and I get there early because he tends to work late in the day. And I remember he comes to Il Tinnello and they know him very well. And as he's sitting, I see the waiter sort of glide over and put a martini in his hand and it looks sort of one smooth movement. Martini in the hand, sits in the chair, drinks the martini, puts the empty glass down. That was how dinner started. And we have a very nice dinner. And Carl's

• 46:16Speaker 01

  a good storyteller and he's a lot of fun. But about halfway into the dinner, my wife leans over to me and she said, "Honey, he doesn't know your name."

• 46:24David Senra?

  [laughing]

• 46:27Speaker 01

  Anyway, Carl then started calling us, because I had a team, and he would ask us to research ideas that he had. So we would research ideas. And I remember my partner, Carl Seidoff, who's still, to stay the president of Take-Two, got really annoyed at Carl's speaks his mind, because I was asking them to do like research for Carl Icahn. He's like, "He is the richest guy on Wall Street and we're doing spec research for him. Oh, and incidentally, he has informed us we will never get paid." Like, "What are we doing here?" I said, "You know, I just don't know, but I feel good about this." So one day Carl calls up and he says, "Keith, you familiar with this video game company called Take-Two Interactive?" And I said, "I'm really familiar with it, obviously. It's a really messy company."

• 47:05David Senra?

  I used to own 20% of it.

• 47:07Speaker 01

  Take 2 is in very bad shape. It's failing. It's got very bad management. The chairman had been indicted. It was under investigation. They hadn't filed financial statements. And it wasn't even that cheap, despite all that.

• 47:19David Senra?

  Wait, the chairman is under indictment?

• 47:22Speaker 01

  Yes.

• 47:23David Senra?

  Okay, they're being investigated.

• 47:24Speaker 01

  Yes.

• 47:24David Senra?

  They canceled their annual meeting.

• 47:26Speaker 01

  Correct.

• 47:26David Senra?

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

• 47:31Speaker 01

  Four, four entities.

• 47:32David Senra?

  Okay, four different entities.

• 47:33Speaker 01

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

• 47:39David Senra?

  They have how much in revenue?

• 47:43Speaker 01

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

• 47:54David Senra?

  And you're like, great.

• 47:55Speaker 01

  No, I'm not great. I said, this is a disaster. And so we wrote a whole memo and we said, stay away from it. No, I wish I could send so forward thinking. So I sent over the memo saying, this is a disaster, stay away from it. By the way, like, I've done video games. I like no interest. And we were doing other stuff that was more tech-driven that we were doing really well with, really well with. So he calls up like...

• 48:16David Senra?

  What was the market cap of the company back then, though?

• 48:18Speaker 01

  About 700.

• 48:19David Senra?

  So it went up 7X from when you had to sell? Because it was 100 million when you...

• 48:24Speaker 01

  Correct.

• 48:24David Senra?

  Okay, okay.

• 48:25Speaker 01

  So, you know, it's not great, frankly, in a growth business. And they had increased the revenue materially. They built a business. It was a business. I'll beat a very bad one. So he calls a month later and he says, listen, I have a friend who's looking at buying a big stake in Take 2. Can you refresh your memo and do this for the friend? At this point, Carl, slight off, like, loses his mind. His head is... He said, all right, so this is... It was bad before when we were doing free work for Carl Icahn. Now he's pimping us out to his Wall Street buddies for free? Like, this is outlandish. And I said, you just never know where this can go. Like, you never know. So we do the memo, which essentially says, once again, it's a mess, stay away. Again, not being so forward thinking. I don't know how much time goes by. Carl calls me and he says, listen, this thing Take 2, you ever look at this? I was like, yes, I looked at it for you.

• 49:10Speaker 01

  And then I looked at it for your buddy and I said, don't do it. He said, yeah, yeah, yeah, that thing Take 2, it's really interesting. He said, have you read the bylaws? I said, no, Carl, not read the bylaws. He said, well, you know what you ought to do? Read the bylaws. And he hung up. So Ben read the bylaws and he comes in the next day and says, "Holy shit, this company has a plain vanilla, unamended Delaware charter. And in this charter, the right exists that if you have 50.1% of the shares vote to fire the board, you can take over the company." And because the company was so troubled, the stock had collapsed into about 20 hedge funds' hands.

• 49:54Speaker 01

  So this was actually mathematically possible. The problem is, you can't go run around and solicit people to vote their stock without creating a group, most likely, and this is arcane stuff. But, and we didn't have any money, so we couldn't buy stock. For the money, we could go in the market. And we didn't have the money even to mount a proxy fight, which would be the standard way of going about it. In those days, a proxy fight would cost $3 million. We didn't have that, particularly because it was total, totally spec. But, under SEC rules, you could solicit up to 10 shareholders. And about 70% of the stock was in the hands of 10 shareholders. I mean, without triggering any kind of filing requirement. So we put together a deck of what we would do to fix the company. And we go meet the 10 shareholders, who are happy to meet with us

• 50:37Speaker 01

  because we're talking about a position they have in a troubled company. And we start getting commitments of who's gonna, you know, sign the unanimous, not the, sign the written consent that would give us the company. It's all you had to do, sign a consent. So we go through this whole process. We've now gotten all 10 that we can get to. We can't go to number 11 through 20 legally. Or you can't publicize it either. You can't market this at all. So it's all done quite quietly. And Ben comes in and asks, he said, "We got 48%." I was like, "Okay, it's game over, we're done." And he said, "Well, let me just think about it." And Ben's a very smart guy. He goes home the next day, comes in. Turns out, there's another provision in the agreement, in the bylaws.

• 51:20Speaker 01

  If you show up at the annual meeting and you, you don't have to put an item on the agenda in advance, which is unheard of. You can just raise your hand at the meeting and say, "I want to vote." And if a majority of the shareholders vote in favor of your slate, you can take over the company at the meeting, which is unheard of, just unheard of. It doesn't exist, but it did exist here. But it's not 51% of the people who show at the meeting. It's 51% of the votes in the meeting, but you have to be there physically. You cannot vote by proxy because remember, we didn't file a proxy. And we can't solicit anyone. But what we did do was go back to those 10 people and say, "Look, do you want to form a group with us now so we can actually talk

• 52:03Speaker 01

  and reach an agreement, show up at the annual meeting, vote for us? And we think we can win that way." Even though we only had 48%, because we knew not 100% of the shares would show at the meeting. So that's what we planned to do. And we get a lot of support, we think, we think, until it's very close to the, they had scheduled a meeting. We form a group, we now announce, or we indicate to the company that we're doing this weeks before the meeting. The company, not a professionally managed company, to say the least, not a good board, to say the least. They really didn't even know what to make of this. They'd never seen it before, they didn't understand it, they had bad counsel, they just, no idea what to do. So we're like, we have 48%, we think that's pretty good.

• 52:48Speaker 01

  If, you know, 75% of the shares are at the meeting, probably good. Until we find out that these hedge funds had loaned out their stock to short sellers, as one does. And if you do that, you can't vote the shares. And we can't solicit anyone, remember. We've solicited our 10. So I said to Ben, "So what percent do we have?" He said, "You're not gonna like this, 22%." And I was like, "Hmm." So we don't have to disclose that. We had our prior disclosure about the group, which was at 48%. And we go to the meeting, physically go to the meeting. And at this point, there's been a journal article, because no one's seen this before, and there's like television cameras out front, and we're at the meeting.

• 53:31Speaker 01

  Walking into the meeting in a hotel and we'd hired the two top proxy solicitors just to protect us and we'd been smart about the people we hired and we spent a lot of money for us on fees because we had to. We go to the meeting and before it starts, a guy waves across the room and I go over and say, super friendly, he said, "Hey, I haven't seen you since law school." It's great, I went to law school. He said, "It's great to see you. This is so interesting. How are you doing? How's your family?" And we talked for like five minutes. I go back and I said to my proxy solicitors, "Who was that guy?" And they said, "He's Fidelity." Now, Fidelity was a larger shareholder, but they had declined to participate in our group. So, we had no idea where they would vote.

• 54:16Speaker 01

  And Fidelity doesn't typically support anything hostile. They typically support management. So, I looked at my solicitors and I said, "We just won." So, the company had a new general counsel. We had a room in the hotel. The company had a room in the hotel. Coincidentally, the CEO of the company declined to attend the meeting. That gives you a sense of what we were dealing with here. This is the Thursday, by the way. And the general counsel comes into the meeting room that we're in and he says, "Well, we don't have the final vote, but we have a provisional vote. You have 88%." He said, "So, will you accept that or do you want us to keep counting?" I said, "We'll accept that." And the next morning,

• 54:57Speaker 01

  Friday morning, I walked into the company and walked into the corner office and became chairman of the company.

• 55:03David Senra?

  That was what year?

• 55:04Speaker 01

  That was 07.

• 55:05David Senra?

  And you're still running it?

• 55:07Speaker 01

  I'm chairman now, I'm CEO. Ben was the CEO from 7 to 11, then he decided to leave and I became the CEO.

• 55:13David Senra?

  So, this is what you described as basically a hostile takeover, no capital?

• 55:16Speaker 01

  Yeah.

• 55:17David Senra?

  Deal is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade and one thing they all have in common is they understand that recruiting and hiring the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, 11 Labs, Uber and DoorDash all use Deal. Many of the top founders I know have personally invested in Deal. Deal after using their product. And what they discovered is that Deal is the best company in the world at building infrastructure for global hiring. Deal will help your business hire, pay and manage any worker anywhere in the world. So you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers.

• 55:58David Senra?

  The founder of Eleven Labs has a great description of the value Deal can give your company. He said, "We built Eleven Labs to break down language and communication barriers. With Deal enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories and ideas to every corner of the world." Deal is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deal.com/cenra. That is deal.com/cenra. So now you come in, you went from writing this memo to Carl, Icahn like stay away from this, to we just took over the company. What was your plan?

• 56:38Speaker 01

  The plan was, there was only one good property, which was GTA, which was in development and was soon to be released, we thought, ended up getting delayed. And everything else was total mess, except the NBA franchise, which was really tiny. It was making a tiny amount of money. Everything else was losing money. So our plan was meaningfully to cut costs, run a rational company, be friendly to creative talent, diversify the product pipeline and build an entertainment company.

• 57:01David Senra?

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

• 57:05Speaker 01

  Yeah, we cut about 40 million.

• 57:06David Senra?

  Explain how you did this.

• 57:07Speaker 01

  Well, we have an approach, you know, when you're doing turnarounds, you have to cut costs, but our approach is a little different, which is we don't want to show up and fire people. It's a great way to build ill will. Also, you don't know anything when you show up. And so you might fire the wrong people. And also, who knows, maybe you need everyone, like you just don't know. But badly run companies, oh, we have a rule. We only, we only do turnarounds if we're the first team in. Like if someone tried and failed, we don't do it. You know why? We're not so smart. Smart people all do the same things. So if someone came in before us to do a turnaround and they failed, guess what? They probably did all the stuff that we would end up doing and they still failed. That's not for us. But we were the first team in. If you're the first team in, the first thing we look at is third-party expenses. Every company, particularly

• 57:51Speaker 01

  A big company has, big companies has deals with third parties. You know, I don't know, this was the days where you put discs and cartridges into boxes. So we had a printing deal, we had a cardboard deal, we had a pressing deal for our discs. And we do a top 10 vendor survey. So all the top 10 vendors and how much we spend with all. Then we call them all up and negotiate them down. And the reason we do that is number one, you immediately save money. Number two, you don't scare or upset the team. Number three, you begin to create credibility with the team because the team's like, wow, they just saved all this money and no one got fired. Like, that's pretty good. We also don't do things like, you know, put in new expense policies. Like, that is a great way to alienate everyone. Or let's say, David, let me see your expense report.

• 58:36Speaker 01

  Why did you have lunch, you know, McDonald's on Tuesday with, you know, Mike? Like, why? Like, that's a great way to alienate David. And if David has another option, he's going to leave the next day. So we don't do that either. But our top 10 vendor approach saves a lot of money. And then, you know, about three to six months in, when we know, you know, what's going on, then we have to right-size the overhead. And most instances, of course, you know, sadly, you have to cut some headcount.

• 59:01David Senra?

  Yeah, especially at a company like this. How much money was GTA making back then?

• 59:04Speaker 01

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

• 59:13David Senra?

  Okay, so what was your plan for that?

• 59:15Speaker 01

  Make other hit titles.

• 59:17David Senra?

  This is, it goes back to your insight from, because I don't even know if we were explicit about this enough, but you wanted, when you were like a kid, you're like, I want to run a movie studio. Right?

• 59:26Speaker 01

  Yeah.

• 59:27David Senra?

  And then 20 years into your career, like, no, I want to run a movie studio in 1926, not 1987, or whatever it was.

• 59:33Speaker 01

  Exactly, and here we are.

• 59:33David Senra?

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

• 59:37Speaker 01

  And how we're going to do it, we're going to try to be the most creative, the most innovative, and the most efficient company in the business, which was the same rubric I used at every entertainment company I ever ran. When I told that story, because take to his public, I had to tell the story. I remember investors saying, how does that plan differ from your plan when you were at Fox? I said, it doesn't. It's the same plan. It's the entertainment business. And we have found that the rubric which we use to this day, you know, if you're honest and if you're true to the rubric, if your decision making supports the rubric, tends to work.

• 1:00:08David Senra?

  You take over the company and the market cap is 700 million, whatever. Today it's 30 billion, whatever.

• 1:00:12Speaker 01

  35 ish.

• 1:00:13David Senra?

  That's an insane run, by the way. That's absolutely incredible.

• 1:00:16Speaker 01

  Thank you. Great, great team.

• 1:00:17David Senra?

  So can you explain the ideas that you're putting into place? Like, was anybody even thinking about taking ideas from building movie studios in the 1920s to video games in the, you know, early 2000s?

• 1:00:31Speaker 01

  No, that isn't what people thought. What people thought about there was making a great video game. That's what they had to think about.

• 1:00:36David Senra?

  No, I meant you.

• 1:00:37Speaker 01

  Was I thinking?

• 1:00:38David Senra?

  No, yeah, like any other people doing?

• 1:00:40Speaker 01

  Oh, doing? I was doing?

• 1:00:41David Senra?

  Yeah, like you were applying this idea.

• 1:00:43Speaker 01

  No, but I mean, I'm not sure that that idea informed what we did day to day. And there were some great executives who built great companies, EA and Activision, among others. And certainly, I don't feel like I had any kind of monopoly on figuring this out. And it took us a long time to turn the company around. And we had some meaningful missteps. And, and we have not created more of that, you know, more value than anyone else in the business. I would argue that, I mean, for pure play, probably Bobby Kotick has with Activision.

• 1:01:12David Senra?

  So what were these missteps?

• 1:01:14Speaker 01

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

• 1:01:18David Senra?

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

• 1:01:22Speaker 01

  Oh, no, no. In the beginning, we didn't make too many mistakes. I mean, how could you? Like, when you're on the floor, there's nowhere to fall. This was a terrible company, terribly run. Every decision they made was horrible. I mean, no, no, it was very easy to make sound decisions.

• 1:01:37David Senra?

  Yeah, this is something I thought was interesting I heard you say, where, you know, your pitch to talent was, well, one, you, I think anybody that's successful has some form of ego. But you're willing to like put yours aside. And you've said some stuff where like in entertainment business, the only people that matter, or you're like, I don't matter. It's the people that make the hits that matter.

• 1:01:55Speaker 01

  Yeah.

• 1:01:55David Senra?

  Which is like a very interesting thing to say.

• 1:01:57Speaker 01

  Was the added benefit of being true.

• 1:01:59David Senra?

  Yeah.

• 1:02:00Speaker 01

  You can replace people like me.

• 1:02:02David Senra?

  Yeah, you can replace the hitmaker. So, but what's fascinating to me is your pitch to them is just like, I'm just going to run a rational organization. I want you, you've used the word rational organization, I think, at least once in this conversation, I've heard you say it before too, it's like, but the pitch is, we're just not going to do any crazy shit.

• 1:02:18Speaker 01

  Yeah.

• 1:02:18David Senra?

  Over a long period of time, that is an edge, can you talk about that?

• 1:02:21Speaker 01

  That was a sort of a nice to have, the must have was, we are going to give you the resources, creative and financial, to pursue your passion. We're not going to interfere creatively, we want you to make the best video games on earth. That was the pitch, and we mean it. And we will support you through thick and thin to do so, more than any other company. Oh, and by the way, then we'll run a rational business organization, no one's going to scream at you, you're not going to find out that someone's getting indicted, we're not going to get sideways with the FTC, and, you know, it'll be like a real grown up company. And then over time, I couldn't promise this right away, but, but I had to promise it. I said, we'll also have a solid balance sheet, so that when we fail, inevitably you fail

• 1:03:05Speaker 01

  in the entertainment business, we can live to play another day. That took us a few years.

• 1:03:09David Senra?

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

• 1:03:26Speaker 01

  Not in the least.

• 1:03:27David Senra?

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

• 1:03:31Speaker 01

  I love them. I'm serious.

• 1:03:34David Senra?

  Okay, then why don't you guys say more about that?

• 1:03:36Speaker 01

  I mean, you, you have to sincerely care about other people to be an effective leader. I sincerely care about, care about my colleagues, genuinely. And I don't love every attribute of every one of them, and I don't love every conversation we have, but if they don't love every attribute of me, I just did a 360, I found that out, not that it came as a surprise. But we care about one another, and I want the best for them and for the organization. And I treat everyone with respect, and I demand that everyone do the same thing. There's no yelling at the company, there's no bad behavior, if you engage in bad behavior, you gotta leave.

• 1:04:17Speaker 01

  So one of our competitors at one point had 500 sexual harassment claims at their company.

• 1:04:22David Senra?

  From one guy?

• 1:04:23Speaker 01

  No, no, unfortunately, it was broadly distributed, you know, and we don't, we don't have, you know, we've had, obviously, a few things here and there, but we don't have claims like that.

• 1:04:34Speaker 01

  We treat people with respect. People can come as they are. We don't care about your ethnic background, your religious background, your orientation, your lifestyle, the color of your hair. Just do great work, seek excellence, and be kind to others. And by the way, I've had plenty of hard conversations, like, super hard conversations. And, you know, you said it earlier, like, and I think I learned this with Barry Diller. I just don't take it personally. It's not personal. Like, we have a business. I never say the word that executives use. I'm like, we're a big family here. We're not a big family here. This is an enterprise. My family's at home. So, we don't have all the angst around being a family. However, we are an enterprise that treats people with respect.

• 1:05:19Speaker 01

  And if someone is offside with me and they misbehave, like, I don't see myself as so important that you can't do that. I don't feel the need to, like, teach everyone all the time. I had to learn the hard way. Like, the delete key is there for a reason. I had one creative person who isn't with us any longer because it just, it did get to be too much and the value delivered wasn't worth it, to say the least. But he used to send the most outlandish and unpleasant emails. And I remember saying to someone, I don't know, maybe a board member, I said, "This is really tough because the lack of decorum is so outlandish that at some point, he's in a do or say something where I just have no choice but to fire him."

• 1:06:02Speaker 01

  And then I realized, "Wait a second, I always have a choice." You know what the choice is? Delete.

• 1:06:06David Senra?

  Right now.

• 1:06:07Speaker 01

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

• 1:06:10David Senra?

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

• 1:06:11Speaker 01

  No, deleting his emails. I was like, "How can I be offended if I delete them? I just deleted them."

• 1:06:16David Senra?

  Without reading them?

• 1:06:17Speaker 01

  Absolutely. If I read them, they'd upset me. Eventually, he had to go because it was just too bad. But, but I put up with it for a long time.

• 1:06:24David Senra?

  I don't know. I find this very interesting, that, like, just doing, like, being completely rational over a long period of time can actually give you an edge in business.

• 1:06:33Speaker 01

  Well, in the entertainment business, particularly.

• 1:06:35David Senra?

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

• 1:06:43Speaker 01

  Yeah. We don't engage in magical thinking, which is hard not to do in the entertainment business. Magical thinking is because I want it, it's going to happen. Right? Magical thinking is... Oh, I don't know. Someone's gonna see this podcast and they're gonna call me up and say, you know, we need to give you $10 billion to do X. Like, that's magical thing.

• 1:07:04David Senra?

  That's very likely going to happen.

• 1:07:06Speaker 01

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

• 1:07:10David Senra?

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

• 1:07:23Speaker 01

  But I had dinner with Carl.

• 1:07:25David Senra?

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

• 1:07:30Speaker 01

  So the starting point is not like we run a rational organization. The starting point is we will support your creative activities through thick and thin. And that gets tested. And you know, when it gets tested, the worst possible time. And so I like to say, culture like character is tested in the breach. You're not tested when things are going well. Great, we're just delivered a hit. We're making all this money. This is awesome. Like, have a celebration. That's not a test. The test is when someone comes into your office, and this happened to me. And we had not turned around the company yet. We had very limited capital. And we were developing a game and it was about to be released two months later, which is to say it's done. And we'd spent a lot of money. And the head of the division came into my office and said, "Look, we just don't think this is good enough.

• 1:08:14Speaker 01

  And we think we screwed up and the art style is not appropriate and it's not differentiated. So we want to remake the game." I was like, what does that mean? And this is a long time ago, so it's slightly different. And he said, "It means $50 million of incremental dev costs. A lot of money to us and another year." And it was on a release schedule, which we didn't ask. And I was like, I dug in. I mean, I don't give like knee jerk answers. I dug in and did my homework. In the end of it, I supported the decision. And that title became Borderlands. Had we not done that, Borderlands wouldn't have been a hit.

• 1:08:50David Senra?

  Yeah, that's a huge game now.

• 1:08:51Speaker 01

  And that was a non-obvious decision. And I'm pretty much can assure you, no one else in the business would have done it.

• 1:08:57David Senra?

  Why?

• 1:08:58Speaker 01

  Because it was insane. They would have said, "The game is done. Put out the game, move on to the next thing." I'm not spending 50 million bucks to remake the goddamn thing in another art style, and I have no evidence that one will work either.

• 1:09:09David Senra?

  So you just trusted the intuition of the talent?

• 1:09:12Speaker 01

  I had to. That's the story. Be the most creative, be the most innovative, be the most efficient. I hired the most creative people. I said, "You have to pursue your passions. We will support you." They came and said, "This is our assessment. This is our passion. Are you gonna support us?" And I said, "Yes."

• 1:09:28David Senra?

  The timeline's slipping because you're sitting on the most valuable media property in the world, and everybody online is just like, "When's GTA 6 coming out?"

• 1:09:38Speaker 01

  Yeah.

• 1:09:39David Senra?

  Like, how do you deal with this? How do you deal with the timelines? It's just like, the answer to that question is, "I don't know," right?

• 1:09:44Speaker 01

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

• 1:09:47David Senra?

  Oh, okay.

• 1:09:48Speaker 01

  No, it's been announced.

• 1:09:48David Senra?

  But this has been pushed back...

• 1:09:51Speaker 01

  I think twice.

• 1:09:52David Senra?

  For like, how many years?

• 1:09:53Speaker 01

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

• 1:09:56David Senra?

  Okay.

• 1:09:57Speaker 01

  Not much more than that.

• 1:09:58David Senra?

  Is it the most successful video game of all time?

• 1:10:00Speaker 01

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

• 1:10:03David Senra?

  From just revenue?

• 1:10:04Speaker 01

  I think if you counted every, like, Mario Kart, Call of Duty, and a bunch of others, it's not entirely clear, but I think in terms of the value of the IP, most people believe it's the most valuable entertainment IP ever created. Though people could argue about that.

• 1:10:16David Senra?

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

• 1:10:18Speaker 01

  Not the total revenue. It's a lot.

• 1:10:24Speaker 01

  The reason people keep playing is because it's constantly updated and it's really great. And the most recent content pack was awesome.

• 1:10:29David Senra?

  And honestly, like, the social element to like, catch up...

• 1:10:31Speaker 01

  You can actually talk and connect and play together. And yeah, it's amazing that people don't realize that, you know, online games are highly social experiences.

• 1:10:40David Senra?

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

• 1:10:43Speaker 01

  It's everything. My mom is 90. She plays, um, she plays Bridge online, and she's...

• 1:10:50David Senra?

  With Buffett?

• 1:10:50Speaker 01

  Sorry?

• 1:10:51David Senra?

  With Buffett? Warren Buffett's...

• 1:10:52Speaker 01

  I never asked her. Somehow, I doubt that. She's good, though. And she has Bridge friends who she's never met in person. And she gets around. She's mobile, but she doesn't get around the way she used to. And so this is an enhancement of her life. It's a social life, and it's something she's good at and loves doing. And she's 90, so this is a... This is an industry that speaks to little kids and people, you know.

• 1:11:17David Senra?

  Gaming is enduring. I mean, we played that since the dawn of humanity, figure out games to play with each other. There is something you said earlier that I want to pull out from your book. You said, "I don't believe in magical thinking." And I don't think visualization is magical thinking. But you do talk about in your book being very, very particular. The note I left myself when I got to this section of the book is that the universe rewards the specific ask and punishes the vague wish. And your point was-

• 1:11:45Speaker 01

  And that does sound a little magical, but you have to dig into-

• 1:11:47David Senra?

  That was my note, based on like my interpretation of what you're saying. And you're talking about this idea of like creative visualization, which again, like, people think is like some willy foo foo thing. I've read 415 now biographies of history, script entrepreneurs. I've kept every single note, every single highlight, every single transcript of anything I've done for that project I've been doing for a decade in this giant searchable database. Visualization comes up all the time, and these are not willy foo foo people.

• 1:12:14Speaker 01

  No.

• 1:12:14David Senra?

  And I love what you said about why it might be effective. You said, "I'm pretty sure it works because the method requires one to concentrate hard, exclusively, and frequently on what one wants." Can you say a little bit about that?

• 1:12:26Speaker 01

  Sure. I mean, I think having not done as much research as you, but having read a billion biographies, I was very focused growing up on success, traditional success, but also political success. And I tried to sort of drill it down to like, what is the factor that is most common among highly successful people? And the only thing I could come up with was they knew what they wanted. And it's not because you know what you want, like Napoleon Hill, you know, write it on your mirror, like, "I want a million dollars on Thursday." It's because I wanted to build a diversified collection of media, communications, and entertainment assets, supercharged by technology, starting in 01, and I've been laser focused on it ever since, which means I make choices that are in service of that.

• 1:13:12Speaker 01

  So here's magical thinking is, I want to do that, but you know what? It's a very nice day out there. I'm going to the beach today, tomorrow, and the next day. You just told me, like, you're a reasonably successful guy. You just told me you work seven days a week. I have, you know, three jobs. I work really hard. Why? Because I have a set of goals and I'm focused on achieving those goals. Now, there's still no guarantee. There's still no guarantee. But by knowing what you want and working in service of what you want, you are much more likely to get what you want than if you don't know what you want or work in service of that thing. That's the truth. And when I started ZMC, I thought, I want to build, I don't know, a $20 billion company that looks like this. And it was out of the blue.

• 1:13:54Speaker 01

  And I can't, it wasn't like I ran around and was talking to people as I was endlessly and vainly trying to raise capital or find companies that they were saying, this is awesome. You're doing great. Like you are, who's better than you? People are like, this is a crazy idea. This is crazy. But I looked at it and said, I don't think it's so crazy. I think it's possible. And even if I fall short, I'll probably get closer than if I don't try. And I was okay with that. And I've said this, and I said it publicly, like, it took us, I think after 10 years, I was speaking at MIT. I remember I wanted to build a $20 billion company and one of the students said, how big's your company now? And I said, well, if you take everything together, I don't know, it's about a billion dollar company. And he said, are you deeply disappointed?

• 1:14:39Speaker 01

  And I said, well, I was, I really appreciated the question. I said, look, it isn't what I set out to do yet, but you know what? We're, it's directionally correct and I'm not stopping. And if this is as good as it gets, at least I tried and you know, we, we made a little progress. We did okay. Well, today, our company, taken as a whole, and it depends on our market cap, we call it a $40 billion company. It kind of exceeded our goals and we're not done yet. But we wouldn't have done that if we didn't know what we were trying to achieve. So today, Take-Two has this, and I advocate this for every enterprise. The mission of Take-Two is to be the number one entertainment company on earth. That's a pretty bold idea, but everyone understands it.

• 1:15:20Speaker 01

  The strategy to get there is be the most creative, be the most innovative, be the most efficient. Remember, I said that earlier. And the culture. In which we work is one of seeking excellence, working together as a team and being kind. Remember that from before. There are 14,000 people at Take2. There's not one person who can't tell you that. It's simple, it's straightforward, and has the added benefit of being true.

• 1:15:44David Senra?

  This is why I asked you before we started recording, like, if you mind if I do an episode on your book for my other podcast. Again, I want to read this because I think it's really important. And, you know, people have asked me before, it's like, what's the most important thing you've learned from this this crazy, like, decade-long study of history, history, and stories you've done? I was like, if I had to put it into one word, it'd be focus. It's like, they are just unbelievably, almost like a different species in the term of, in terms of how they can focus. I want to read that part I just read. It says, "I'm pretty sure it works because the method requires one to concentrate hard, exclusively, and frequently on what one wants." And then you end this chapter with another great sentence. "The most important thing you can do to achieve the success you desire is to discover your ambition, narrow its scope with a great, with as great a degree of specificity as possible,

• 1:16:26David Senra?

  and blazon it on your consciousness and revisit it daily."

• 1:16:31Speaker 01

  That is visualization. It's just not like magical visualization. I was on the phone with, a Zoom call with one of my colleagues, because I'm reachable by everyone, everyone. If people email me, or text me, or Slack me, I respond. And I'd been doing a town hall in our office in Austin, and this woman Slack'd me afterwards, brand-new colleague, and said, "Can I have a chat with you about my career?" And I said, "Sure." And we were chatting, and she was really impressive. I was quite taken with her. And at the end of the call, she said, "What should I do to succeed around here?" I said, "Well, you need to know what you want. And then you need to show up on Monday and think about how you're going to create more value than you cost. And then on Friday, think about, did I create more value than I cost?

• 1:17:16Speaker 01

  Because if you're here for a year, and you get paid $100 plus $25 in benefits, and you generated $10 in value for this enterprise, one of two things will happen. Either you're going to lose your job, or this company will fail. If you want to succeed, and you want the company to succeed, you've got to create more value than what you cost." And I said, "So, think about that." Because she'd already decided what she wanted. This was not about, she knew what she wanted. She wants to be CEO, which is great. Terrific. And then I said, and so, you know, and then come to work. Don't have political exchanges. Put a smile on your face. Say yes. You know, you're going to be fine.

• 1:17:55David Senra?

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

• 1:18:13Speaker 01

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

• 1:18:22David Senra?

  Which I want to talk about, yeah.

• 1:18:22Speaker 01

  Using the the tools in the book. And as you saw in the book, like some of them are exercises. Like you have to do the work to get the benefit. And so someone will reach out to me and while I'm easy to get to, like you still have to do some homework and I don't schedule, like maybe I schedule, I like having a system who schedules me. So there's a bit of a process to have a meeting with me. It's not like, hey, come on in tomorrow at nine o'clock. And I am amazed, like people will come in with a specific ask for something that would affect their life. And we spend time on it. We talk about it and maybe I assign them one of the exercises in the book. I usually do. And I would say about half the time, they never follow up. And that to me is kind of astonishing. And I don't think it's because I'm a horrible person or I'm scary or something.

• 1:19:08Speaker 01

  I think there are people who believe if I can just get into a room with that really successful person, they can just wave a magic wand and I will have success. Sort of my point earlier, someone's going to listen to podcasts and I'm going to win the lottery. And it doesn't work that way. One of the things I understood about starting ZMC, look, I've been around the block. I don't think I have an enemy in the business. I mean, I, and you probably know this from your homework, like I know everyone and I like everyone. And as well, most people like me and I think candidly, I have a very good reputation. Nonetheless. I think people confuse that with somehow having a shortcut. So I had the attributes I just described. Lots of people wanted to help me when I started ZMC.

• 1:19:52Speaker 01

  The conclusion I arrived at was, no one can. They would love to. I had all kinds of goodwill. What can they do for me? I had to run out. I had to find the deals. I had to go see Carl Icahn. I had to hire a team. I had to pay the team out of my pocket. I had to manage the team.

• 1:20:07David Senra?

  Think of the story you told earlier when you were recruited to 20th Century Fox. I have a maxim that appears in these biographies of history's greatest entrepreneurs. It's like, opportunity handled well leads to more opportunity.

• 1:20:18Speaker 01

  Right.

• 1:20:18David Senra?

  You had to handle the opportunity at Verstraun. How do I say the company name?

• 1:20:22Speaker 01

  Verstraun.

• 1:20:22David Senra?

  Verstraun first for this guy to be like, hey, I need some help now. And the whole thing is like, that's why he's like, whatever. This is again from Buffett and Munger. They say they believe in Carlyle's prescription, which is like, do the best possible job on the opportunity you have in front of you.

• 1:20:37Speaker 01

  Yeah.

• 1:20:37David Senra?

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

• 1:20:41Speaker 01

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

• 1:20:43David Senra?

  What else would you be doing anyways?

• 1:20:45Speaker 01

  You can't do anything better.

• 1:20:46David Senra?

  But you said earlier, when you went on my friend Patrick's podcast, I think you mentioned this book. You're like, how few people, this book is not for sale. You can't buy it, but you give it out. And even that, where hundreds of thousands of people heard that, and you're like, 50 people asked for it.

• 1:21:01Speaker 01

  Yeah.

• 1:21:02David Senra?

  That's insane to me. I think it's tied to what we were talking about earlier. It's like, you have this edge that you can just run a rational organization over a long period of time. You also, I think, understand that time carries most of the weight. Think about the compounding you've done over the last 25 years from 750 million to 40 billion. And it's just like, I'm going to apply this rational. I'm in a good business. There's technology tailwinds here, and I'm going to apply this rational organization, working with the best people possible. And the score, kind of the score takes care of itself over multiple decades. You said you want to do 20 billion. Well, you've doubled that, and you'll probably keep going on to that.

• 1:21:33Speaker 01

  That's the goal.

• 1:21:34David Senra?

  Let's go back to the talent and how you serve the talent. Because when I hear, the conversation we had, the book I've read, and the interviews I've heard of you, it's like, you seem to be very comfortable, almost like you're in the service business. Is that a way that you think about this or no?

• 1:21:49Speaker 01

  Yeah, I think a good CEO needs to serve his or her team. And no work gets done in the CEO's office. So what do you really do? You agree on the mission, you set the strategy, you agree on the culture, and then you drive daily execution. But you're driving that daily execution through other people. And how do you do that? You have to motivate them. You have to, obviously, stay informed, you know what's happening. And then you have to motivate them. The very rare occasion that a problem can't get solved below my level, you gotta solve the problem. On the rare occasion that a decision about an approach or capital allocation, you know, isn't obvious or is above someone's approval level, it comes to me. You know, I'm not writing memos. I'm not, you know, I'm not doing Excel spreadsheets.

• 1:22:34David Senra?

  And are you adapting your style to each individual talent?

• 1:22:39Speaker 01

  Of course.

• 1:22:39David Senra?

  Okay, so this is-

• 1:22:40Speaker 01

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

• 1:22:43David Senra?

  Okay, so we had the same experience where like, some of these books are great and the titles are terrible. Like, How to Win Friends and Influence People.

• 1:22:51Speaker 01

  It sounds like How to Be the Most Popular Boy in the Class.

• 1:22:54David Senra?

  It's just like, so many people told me about that book. I didn't read it because like the title's terrible. But you almost saved me the need, I already read the book, but you almost saved me the need to read How to Win Friends and Influence People. And your whole thing is just like, take a sincere interest with an emphasis on the word sincere in other people.

• 1:23:12Speaker 01

  Right, that's the story of the book.

• 1:23:14David Senra?

  That is really a book on sales and leadership.

• 1:23:16Speaker 01

  Yeah, and friendship.

• 1:23:17David Senra?

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

• 1:23:21Speaker 01

  Well, I mean, I just did a 360 and, you know, I, there was criticism, to be clear. But one of the positive attributes, and there were plenty of those too that were noted, was when he sits with you, he really, really cares about you. He sits with anyone in any level in the organization. He responds to everyone, he's kind to everyone. And you think you're the only person in the room when he's talking to you. You ask me like, how do you deal with like difficult, creative personalities? Because I love them, I care about them. I genuinely care about them, and I care about my executive team. I care about everyone who works at the business. But frankly, I care. You're gonna find this hard to believe. It sounds, I really don't mean it sounds self-serving. I think it's, it's like table stakes of humanity.

• 1:24:03Speaker 01

  I care about the person behind the counter at Starbucks enough to say hello, ask them how their day is going, and interact with them a bit if they're not busy, you know, pouring coffee, which sometimes they are, to see if maybe I can brighten their day a little bit. Like, why wouldn't I? There's a great story in Dale Carnegie's book where he tells the story of, I had an idea. I went into the post office and I wanted to brighten the day of the guy behind the counter. And he says, I'm struggling with what I can say because I really was, this is an exercise for me. Gets to the front of the counter and the postman behind the counter apparently had a great head of hair. And so Dale Carnegie says, you have a great head of hair. I wish I had a head of hair like that. And the guy said, oh, thank you.

• 1:24:48Speaker 01

  Because I'm kind of proud of my hair. And they had a little interchange. And Dale's telling the story to a friend and the friend says, well Dale, what did you get out of that? And he said, what did I get out of it? Are we so small minded that we need to get something out of every interaction? How about that I improve that person's day and it improve my day? How about that? So if you're taking that position as a starting point, look, if you're taking a position like, I'm here doing this podcast, here's my goal. My goal is to look awesome in your podcast. Well, that's a very bad approach. You know, my goal is when I show up to have some engagement like this, now have plenty. How can I be of service to David and to his audience? That's what I'm thinking.

• 1:25:29David Senra?

  One of my favorite quotes ever, it comes from Henry Ford. He says, money comes naturally as a result of service. And I think part of what we're trying to do here is like, this whole show is like essentially a love letter to capitalism. And the reason I say that-

• 1:25:41Speaker 01

  He also said, or it's apocryphal, not clear, whether you think you can or you can't, you're right. He's attributed to him, it's not clear it was him, but we used that line at DMC for the first couple of years because it was so hard to do, we did.

• 1:25:54David Senra?

  It's in your book. That line is in-

• 1:25:56Speaker 01

  I haven't read the book in a while.

• 1:25:58David Senra?

  Oh, I read it this past week. But no, to the degree that we do have any kind of influence is just like, you know, I'm the son of a Cuban immigrant. I grew up meeting people that literally risked their lives to flee communism. I knew from the time I was probably nine years old, something's weird about this country I've been born into, something special here. And so what we're trying to do is like, there's also like, you know, corruption and crony capitalism. It's just like, we're trying to celebrate people that like, they build products to make other people's lives better. They build wealth for themselves, their families. Their employees, they create jobs. We had John Mackey on this podcast, founder of Whole Foods. One of the stories he told is one of my favorite stories, just like because of the fact that we went public early and there was stock options for our employees, like these are grocers.

• 1:26:41David Senra?

  These are normal, just they just want to live a normal life and they're able to send their kid to college because of the stock. They're able to buy a home because of the stock. Like, why wouldn't that? John started that with an idea with his girlfriend, two other co-founders. Like, these people should be celebrated. And I think the reason I thought that came to mind when we're talking right now is because, but not celebrated because you want to do it for yourself. It's in service of other people.

• 1:27:03Speaker 01

  Well, I mean, listen, I'm not a saint and I definitely

• 1:27:05David Senra?

  No, no, no.

• 1:27:05Speaker 01

  My own personal ambitions, including material ambitions.

• 1:27:08David Senra?

  Of course.

• 1:27:08Speaker 01

  And they were palpable and they were meaningful. And the truth is that I've evolved over time. So when I started out, I didn't read How to Win Friends and Influence People for the first few years. I was at Fox when I read it.

• 1:27:20David Senra?

  You dodged the book for a while.

• 1:27:22Speaker 01

  I did. I saw it like you. I was like, really?

• 1:27:25Speaker 01

  And I mean, I think I was the guy who I was insecure. And my approach to a situation was, how am I coming across? How do I look? What do people think about me? What do you think? Let's talk about me. Like, and I could mask it behind sort of a

• 1:27:42Speaker 01

  sort of a humble exterior. Frankly, you can't, you just can't fake humility. And I was anxious all the time as a result. And I nearly failed at Fox as a result of this. And it was a book that changed my life. I turned it upside down, like immediately turned my life upside down.

• 1:28:00David Senra?

  What was the different position you were taking when you were in your early 30s at Fox? It was like, basically, I'm trying to work through you to accomplish what my ambitions were as opposed to actually figuring out that.

• 1:28:11Speaker 01

  I have the answer. I'm the smartest guy in the room. I got the sharp suit on. I can speak grammatically. I got a couple of Harvard degrees. We're just gonna do it my way. I mean, I wasn't like that because I wasn't a shithead, but that was the subtext.

• 1:28:25David Senra?

  Yeah.

• 1:28:26Speaker 01

  And I shifted that to how can I be of service to you? How can I be upset? And how can I get to know you?

• 1:28:32David Senra?

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

• 1:28:36Speaker 01

  Sure. There are all different styles at work. And one of the things that I've learned is it isn't one size fits all. And my approach is not for everyone. And by the way, I'm not the most successful guy on earth, not even close. So I, this is not by way, and I hope it didn't come across as weird, like this is my approach and everyone should follow my approach. To your, to your point, you've interviewed loads of people and you've read hundreds of books. It's not the same approach. There are some common elements, of course. But Elon Musk's approach to business is diametrically different than mine.

• 1:29:06David Senra?

  Yeah, he does not have be kind. It's one of the company values. I just did an episode on, with the author of the new book. And one of the things that in that book that he wrote on Elon, in Elon's own words, was that camaraderie is dangerous.

• 1:29:18Speaker 01

  So I don't know him. It is clear that we have very different approaches. And last time I checked, he's the richest guy on earth and I'm not. So I'm not here to criticize him or his approach. It's his journey. But I'm aware of the fact that his style, though completely different than mine, is a very successful style. And in the video game business, I would argue that we run our business differently than anyone else. And there are other successful enterprises, plenty of them. By the way, thank God there are, because if we were, you know, one of one, I'd be nervous about our future. Even more broadly in the entertainment business, there are styles that win that are not my style. Barry Diller's style, for example, the, pardon me, the Socratic method that he pursues, which can be brutal. It really can. I mean, I can't use a, it is brutal at times. That's just not my approach.

• 1:30:02Speaker 01

  I just don't do it that way. But it works for him. We're different people. And I think there are times when I have missed things because I take too soft an approach to, I am, I, I think I can sometimes support people who are on the team longer than I should, more than I should. There are times when I've kicked the can down the road and shouldn't have done that. Although that I really learned from. But I don't, I don't have the view that my approach is the only one or the best one. It just happens to be my approach. And it does, generally speaking, work. And it's worked for my life in that, you know, not the richest guy on earth, but I'm not going to miss a meal. And I haven't built the biggest.

• 1:30:43David Senra?

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

• 1:30:47Speaker 01

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

• 1:30:52David Senra?

  Build a giant business.

• 1:30:53Speaker 01

  Yeah.

• 1:30:54David Senra?

  You don't think in those terms though, right?

• 1:30:56Speaker 01

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

• 1:30:59David Senra?

  Oh, so there's something I want to transition to and ask you about because you have all this experience in media. So like, and obviously I'm kind of in that business, even though I don't know if I think about it. So I want some personal advice to you, but this is such an important thing about one size doesn't fit all. That Daniel Ek, the founder of Spotify and I are working on this project to try to outline all the different founder archetypes. We might even like commission a book on this because it's so important. And it became a lot of conversations where he was just like, he was essentially playing a role. He's like, everybody, all young entrepreneurs, he was technology entrepreneurs in their twenties. They said like, oh, like what's my options? I had to be like Steve Jobs and the way he communicates. And then now I have to be like Elon. And so he's like, I was literally like playing a role that wasn't me.

• 1:31:41Speaker 01

  Right.

• 1:31:41David Senra?

  And he says he wasted so many years of his life not realizing that it, there isn't one type. And it is dependent on who you are and your own style. You just said something that was interesting. I had somebody that works with you email me. I'm curious, people think take two is in the video game business. I think you think of it, you're just in the media business.

• 1:32:04Speaker 01

  The entertainment business, yeah.

• 1:32:05David Senra?

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

• 1:32:08Speaker 01

  Well, media is just a broader rubric. Like include, and it could include advertising, for example, would be media business.

• 1:32:13David Senra?

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

• 1:32:17Speaker 01

  Video games just sounds a bit narrow and we provide an entertainment experience expressed through video games. And maybe that's a difference. It doesn't make a difference, but I think it does.

• 1:32:26David Senra?

  Okay. So explain like how you think about this.

• 1:32:28Speaker 01

  You could think of a video game as like a mobile video game you spend seven minutes on, or you could think of it as Grand Theft Auto six that you spend hundreds of hours on. They're very different experiences. They're both entertainment experiences. I think to call them both video game experiences maybe understates the diversity of experience.

• 1:32:46David Senra?

  Do you think all the different forms of entertainment are kind of like, they compete with one another, but they kind of like, they're all kind of collapsing. Do you look at it like that or no? Like the distinction between a video game. And watching something else or listening to a podcast or interacting with AI, to me, is just all entertainment and information.

• 1:33:04Speaker 01

  Oh, yeah. I mean, I look at the media day broadly and according to activate a consultancy, the media day is like 13 hours in the US. And anything that fits within the media day can compete or coexist. So yes, in that way, but no, at the end of the day, like, you know, playing a video game is still a very different experience than watching a linear television show or movie. It just is.

• 1:33:24David Senra?

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

• 1:33:36Speaker 01

  That's the case with video games because it's the biggest entertainment business and it's growing more rapidly than any other.

• 1:33:41David Senra?

  And the size, it's bigger than all the other forms combined, is that?

• 1:33:45Speaker 01

  Yeah, at the software level, yeah.

• 1:33:48David Senra?

  That's insane, like, and it's growing faster.

• 1:33:50Speaker 01

  Absolutely. It roughly doubled the rate.

• 1:33:53David Senra?

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

• 1:33:58Speaker 01

  Sure, I'm open minded. I think that in the fullness of time, one could ask, would it make sense, for example, for Take-Two to diversify into other forms of entertainment? I can assure you, we would not diversify backwards into backward looking, legacy, declining businesses. But there are other exciting entertainment businesses and there'll be more in the future. And, you know, live entertainment is a really interesting space, for example, that's growing.

• 1:34:22David Senra?

  How is Take-Two using AI right now?

• 1:34:24Speaker 01

  We have hundreds of projects going on and we already have promulgated enterprise software. So we have enterprise versions of ChatGPT and Claude that are available to everyone to use, that are fully licensed and paid for. And then we have about 200 projects going on to try to create more productivity and to give people the tools they need to do their jobs, whether they're creative jobs or executive jobs, more effectively, more efficiently, with more innovation.

• 1:34:55David Senra?

  Let's go back to that story where you're like, well, we need a 20th century fox. We need a business guy. Let's grab this guy. So when you realized you needed an AI person, did you create an entirely new role? Like, how is this structured?

• 1:35:05Speaker 01

  No, we have a new CTO, Dave Klein, and it all reports to Dave because it's technology. It sits within the technology world and, no, I don't, you know.

• 1:35:15Speaker 01

  Not in any way to minimize the effect of all things AI. But first of all, the words mean different things to different people. And we're a technology company that makes entertainment. We always have been. So this is not new to us. And engaging with technology aggressively to create better products, to market them better and to run our business better is what we do. You know, innovation and efficiency. So it fits well within our system. And we've pushed really, really hard to be as ambitious as possible. And even so, I would say we're getting internal criticism and that we're not moving fast enough. But we're trying to.

• 1:35:48David Senra?

  So what is your overall viewpoint on AI, though?

• 1:35:51Speaker 01

  Again, that's sort of like saying, how do you feel about motherhood and apple pie? I like both. All things technology that can create efficiency, I'm all in.

• 1:36:02David Senra?

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

• 1:36:04Speaker 01

  No, I'm not doubtful of anything. I'm totally open minded. But do I believe that, remember what AI is, despite the fact that there are people in Silicon Valley who don't want you to believe this, is big data sets, lots of compute and a large language model mushed together. That's what they are. So data sets by their very nature are backward looking. Creativity by its very nature is forward looking. Creativity is informed by data. You're informed by those hundreds of books that you read. And when you have a podcast, you're informed by the ones you've listened to. How could you not be? But if yours was just a really high quality clone of Patrick's, who would watch yours? And the thesis that, wow, with AI,

• 1:36:47Speaker 01

  we can more efficiently create a completely derivative property, like derivative properties don't work. So that's where the thread has been lost, that AI so far is really great at asset creation, but hit creation is an asset creation. Asset creation is a necessary but insufficient condition for hit creation. So I would love to say that AI will make it easier, quicker and better to make kits, because who would benefit more than we? We're in the business already. We own IP, right? That you know. So you don't have to create new IP, which is really, really hard to do with or without AI. Like create a, you know, a, this table goes to Hollywood, getting someone to buy that video game. That's incredibly hard.

• 1:37:29Speaker 01

  Getting them to buy GTA 6, not so hard by comparison. So.

• 1:37:35Speaker 01

  It's not that I take at all lightly the potential benefits of new technology. To the contrary.

• 1:37:41David Senra?

  No, I think your entire career has been a example.

• 1:37:43Speaker 01

  It's the story of my career. It's just that when our stock goes down by 50 points because people are like, anyone can make a video game. That was the thesis. With AI, anyone can make a video game. It's like, anyone can make a video game last week. Like, anyone could make a video game five years ago. The technology is readily available. It's commoditized. You know how many mobile games get put out a year? Thousands. You know how many hits are made in a year? Zero to five. You know who makes them? Thank you very much. We do. This is just true. And that's not, I mean, that's just true. It's like, you don't need this new technology to create assets that are competitive. That already exists. It will be quicker to do it, but speed isn't the issue.

• 1:38:22Speaker 01

  If I told you, David, with this technology, you can create something that looks exactly like GTA, and it's going to take three years, not 30 seconds, you'd be like, I'll spend three years on it. It's worth it. And that exists. You can, in three years, technology exists prior to AI to clone GTA, but it won't be GTA. It'd be a clone of GTA. Clones don't sell. All hits are by their very nature, unexpected. That's the most important thing to take away. Things that are data-driven in their entirety can't be unexpected. But that doesn't mean AI isn't super helpful.

• 1:39:01David Senra?

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

• 1:39:03Speaker 01

  Thanks for having me.

• 1:39:04David Senra?

  I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.