Lessons of Greatness: ALWAYS know your competitive edge
Mark Cuban: You only have to be right once...if you take big enough swings along the way
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Now, itâs go time with Mark Cuban.
đ Introducing Mark Cuban
Mark Cuban is a billionaire entrepreneur, investor on ABCâs Shark Tank, and founder of several startups such as Broadcast.com and MicroSolutions. Most of us know Mark Cuban by his larger than life persona, but the guy we've seen smoking a cigar in his private jet next to his NBA championship trophy, is actually very real and down to earth. He lives life on his own terms, but he knows where he came from. He'd probably agree with the idea that he's been lucky a few times, but never make the mistake of believing his successes are an accident. It turns out there's much we can learn from Mark's path to greatness. Let's talk to him and find out.
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Teaser below:
đ Highlights from the Episode
Golden Line:
âI say to every one of my Shark Tank entrepreneurs, âHow would you kick your own ass? Because no one knows your frailties like you do. You know where your weak spots are and you have to anticipate that someone else is going to see them. You've got to really shore up things and beat your competitors to the punch.ââ âMark Cuban
From Garbage Bags to Entrepreneurship
If I wanted anything, my dad was always clear, I had to find a way to earn it. Maybe he saw my entrepreneurial spirit even back then and enabled it. But from buying and selling baseball cards, when I was nine, to garbage bags, door to door when I was 12, to selling magazines door to door, there was always something that really came down to me being an entrepreneur.
Building MicroSolutions
I tried to buy a RadioShack TRS-80, and my credit got turned down. And so what I ended up having to do was we would get a computer in for us to install their software on. And I would take those home, or I would stay late in the store and just start figuring all this stuff, out because anything related to technology, I immediately became the technology maven, for better or worse. And so I would just sit there and I would install IUS Accounting, or Peachtree Accounting, where then we got to Lotus 1-2-3.
And literally, for a spreadsheet, I had to go to Lotus and take an official training class. And we had to become authorized as a store in order to sell this spreadsheet for $495 in the mid-eighties. It was crazy, now looking back. And then you learn the macros and you learn how to integrate it. And then there were three dimensional software, there was Borland Software, there was WordPerfect, integrating all these things and learning all these packages. But I spent the time doing it.
I would take that manual home and read the manual when no one else did. And I would put in the time when nobody else did. And even though I didn't have a true computer background from an education perspective I was able to teach myself. And you know how it is, once you have that foundation, everything else is just a Lego block that just sits on to.
Broadcast.com & Being an Investor
My buddy Todd Wagner, came to me and said, "You're the internet guy, you're the tech guy," this was late '94, I think, "and, why don't we figure out a way to use this new thing called the internet to listen to Indiana basketball and sports over the internet?" And I'm like, "Okay, that's a cool idea. Let me think about it." And we talked about it at California Pizza Kitchen in Dallas, and I'm like, "Okay, I'll give you 75 grand just to figure it out. "
I was just going to be an advisor. And then I became a vice president. Then I put in more money and I'm like, "Okay, this is real money now, and so I'm all in," and started running it, along with Todd. And it just blew up from there.
Growth of Broadcast.com
We knew we were going to have to do video. We bought the name broadcast.com for $8,000. And that was just a catchall that worked for everything. And broadcast obviously meant everything. And by that time, most of our revenue came from corporate streaming. We used the Cubs games and sports and all the music and everything we had on. We were breaking bands. Matchbox 2020 broke their first big album on broadcast.com's CD Jukebox. Willie Nelson released albums on broadcast.com, CD Jukebox. We did concerts. But we had really started pushing the envelope in that direction and, and really started pushing video at that point in time, because corporations really needed us. Because back then, if you wanted to have an all hands meeting with video, you would rent satellite time and then go to a local theater, or if you were a big company, you had a satellite dish and that's how you would do it.
We went to companies like Motorola, I'll never forget. They ended up being an investor and saying, "Look, it costs you a million dollars to do an all hands. We'll do it for 500k. There's going to be some fits and giggles along the way, but let us work with your IT people, deal with the firewalls and all that, and it'll work." And it did. We started working with Intel whenever their latest Pentium was, we broadcast the product release with Andy Grove in 20 different languages. It was crazy and it was worldwide and across all these different time zones. And so all the entertainment stuff was proof of concept. But the real moneymaker for us was when we started doing corporate events.
Advice for Founders and Finding Product Market Fit
You've got to really believe in your product. Remember, in the mid-nineties and late nineties, satellite was just starting. So we were competing with satellite, and there was obviously cable television has been around for 15 years. And so when I would sit and tell them the vision, they were like, "You're crazy. I'll just turn on the TV." People would laugh at me, "I'll just turn on the radio." But what I believed in was the price performance curves of PCs. And the price performance from investments in broadband, that PCs would continue to get more powerful. Moore's Law would stay in effect for at least some period of time. The price of disk drives, of networking costs, of bandwidth would continue to fall.
And I truly believed that. And that was a fundamental underpinning for streaming. We called it network broadcasting back then or internet broadcasting. And I firmly believed that streaming would take over all of television because we're going through a convergence of analog television to digital. Literally, there was one point in time after Yahoo! bought us where I was trying to get us to buy all the HD bandwidth from USA Networks. And I thought we were going to have a deal because I just wanted as much wireless bandwidth as we could get trying to do wireless transmission because we had just seen Sirius and XM do that just for audio. But being able to take that 19.2 Megabits, who knows what I'd be able to send to, back then, MP3 players that had no ability to take downloads without connecting.
And so I had that vision that we would follow this path. I saw very quickly that the user adoption was enormous. No one used it and said, "I don't need it." They might have said, "It was a hassle or I'm not willing to go through that." But no one said, "I don't need it." And so when those two things connected, I knew, I knew, I knew, I knew this was a winner. I had no doubt in my mind because of my experiences. And so for entrepreneurs out there, the couple things are, what's the premise, particularly in technology, what's your premise? What is it that makes you guys unique and makes it so that you're sure that you're going to be able to implement what you're trying to implement? What is it that users are going to take away and are you the path of least resistance? And I guess, that really is the underpinning.
I knew that in order for you to listen to OU Sports, I was the path of least resistance. I knew that anybody who wanted to watch or listen to a Mavericks game, I was the path of least resistance. There were no other paths where you could do what I did. There might have been some people competing to try to do the same thing and copy us, but taking our approach, nobody else, we were the path of least resistance. And so if you have the technology working in your favor, you're the path of least resistance, and you have consumption, then you just got to go for it. You just got to go for it because those are the pieces that together create a moat that are really hard to replicate. And then once you get going, building more moats on top of that and creating new, innovative things that allow you to avoid the innovator's dilemma.
Competition and the Market
I would always talk about kicking our own ass. If I'm competing with me, what would I do? And how do I do that before someone else does it? That to me is always the takeaway from broadcast. I say it to every of my Shark Tank entrepreneurs, how would you kick your own ass? Because no one knows your frailties like you do. You know where your weak spots are and you have to anticipate that someone else is going to see them. You can't just hope that no one else recognizes that you can't ship this or your shipping costs are that, whatever it may be. Your development costs are this. You had this breakdown in your code. You've got to know these things and assume, because now the tool's available to tear apart other, to reverse engineer things and supply chains are incredible. And so you've got to really shore up things and beat your competitors to the punch.
But the one thing you can't say, the one thing that irks me beyond any, "Well, this big company, that big company came in. That just confirms the market is there, right?" No, no. It means you better be speeding up and you better be building that moat and you better be differentiating enough where... Look at Facebook. Facebook goes into every market second. Facebook doesn't lead in hardly anything. Maybe Libra, we'll see what happens there or whatever they renamed it to. But they rarely, rarely, rarely lead. But they rarely succeed in the markets that they go after, the secondary markets. They're much like Microsoft used to be before the cloud, before Azure. They had their taxes, the ads, Windows, et cetera, where they get paid and Facebook has got theirs with their ads and the way they really use AI great, but there's certain companies like Facebook, okay, if they come into your market, you're going to see where their frailties are, but you got to anticipate it and be ready for it.
If you start telling people, "Well, if it just validates the market, see that's proof that we're doing the right thing." No. It better be a healthy dose of fear, but also using that energy to really push forward. Because you've got to stay ahead. They can be stupid a lot longer than you can be solvent.
You Only Have to be Right Once
I did a lot of stupid shit and had a lot of dumb deals, but people don't remember or know anything about those. They don't know about the powdered milk. They don't know much about Your Business Software. They don't know all these little companies that came and went. Just so much dumb stuff. But you're right one time and now all of a sudden, people call you an overnight success, even though it might have been 10 years in the making, but you learn. I learned from every failure. I learned from every time I got fired from the companies I worked for. I think I learned more from the companies I got fired from or left than I did from the companies that I really enjoyed. I learned what not to do. And sometimes that's more important than anything.
But, if you keep on grinding and you make things happen, you're going to learn from them if you fail. And if you keep on going forward, all it takes is just one, just one. Whether it's Micro Solutions, that could have lasted me a lifetime, whether it was trading stocks, that could have lasted me a lifetime, whether it was HDNet, that could have lasted me a lifetime, whether it was broadcast.com, you find these niches where you can get good at them and you can keep on trying until you make it.
Mike Maples: One of the things I like about this notion is the idea of an entrepreneur's relationship with risk. A lot of people tend to think of risk as something that's negative, that you want to avoid, that's bad. But another way to look at risk is, risk is something you take as a verb. And on some level, if you're going to start something great and have a B next to your net worth, you have to take a bet on a different future than most people see. And your probability of success may even be less than 50%, maybe less than 10%, but the upside's so asymmetric that you only have to be right once.
Greatest Trait of Any Entrepreneur
When you see things going your way, you better speed up. Because everybody else has seen the speed you're going at and they know what speed they have to hit in order to catch you. If you don't use the corporate knowledge that you have to continue to speed up, you're going to be behind. Particularly in technology, it's just non-stop search for knowledge. Most people don't put in the time to learn, and you've got to always be learning. That to me is the greatest trait of any entrepreneur. Markets change. Everything, changes, technology impacts everything.
We're talking about AI right now, and there's so much fake AI. And you as an entrepreneur, it may not be your core competency, but it's one of those new significant things that is going to change your industry. Much like PCs did in the '80s. I would walk in and people are like, "I don't need a PC. I got Susie over here, takes notes, Johnny, over there who takes notes." But it did change. And if you were a dinosaur and didn't pay attention, same with the internet, same with mobile. Now it's AI. In parallel, it's also crypto to a certain extent. Defi is going to change a lot of things and the way a lot of things are done. Digital collectibles, digital goods, NFTs, all of these things may seem tangential to your business right now, but they're not. Particularly AI because your whole company may be disposed of by artificial intelligence at some level, or there may be a level of efficiency that you can't match. And if you don't understand it and you don't use your corporate knowledge, your industry knowledge to leverage that, you're toast.
So, you've got to have that edge. But on the flip side, if you learn it and you're able to integrate it in ways, and it may not be you personally, but you need to understand it, but find the right people to do it, a person to do it. Then you got an edge.
Cuban Rules of Startups
Don't start a company, unless it's an obsession and something you love.
We talked about earlier, where I would be programming and 20 hours would go by. I went seven years without a vacation. I had no problem doing that. I could have always dialed back, but I didn't. I loved what I was doing. I dreamed about it. I would wake up writing notes. That's how consumed I was by it. The exit strategy wasn't part of the thinking at all, until it was presented to us.
If you have an exit strategy, it's not an obsession.
You see it all the time. Entrepreneurs come in and they immediately say when they're going to exit, and I immediately say, "I'm out." Because you're not committed enough to live it. And that's a key component of success.
A hundred percent, a hundred percent. One of my favorite investments is a company I put in $75,000. I think it was, for 40% because this guy was living out of his car. It was a cookie company called Alyssa's Cookies. He was broke, living out of his car. Fast forward eight years, we did, in the pandemic time it hurt us a little bit. We were only up like 10%, but we did like $16 million, no $18 million, but $9 million of it was profits. And so my 40% of that 9 million, I'm getting quarterly. And that's a gift that keeps on giving. He loves it. He'll keep on working until he decides he doesn't want to. But those types of investments where you're just getting checks, the best Shark Tank investment ever was a product called Comfy. I think Barbara gave them $75,000 for 25%. She's earned, their totals earned, 30 some million dollars because they learned how to execute with a great product that people love.
Hire people you think will love working there.
I hired people I trust. I hired people that wanted to put in the hours, because if they're nine to fivers, it's tough.
Sales cure all.
There's never been a company in the history of companies that's succeeded without sales at some point. That's the only way you can make money.
Particularly profitably, and I think that's part of the challenge now. We really have to get, particularly technology companies, trying to convey to them that it's gross margin dollars that we care about. It's not just top line revenue. Because I have a company right now I'm dealing with who says, "Well, we'll be able to do this, this, and this if we hit 10 million run rate." I'm like, "If you're just buying sales, it's going to catch up to you at some point." You can't just do that forever and make this about an ROAS on your ad spend. No, you've got to find a reason why everybody loves your product. That company I mentioned to you, Alyssa's Cookies, zero, that's how much we spend on advertising every year.
Know your core competencies and focus on being great at them.
You can drown in opportunity, and so whatever you're good at, whatever it is, be great at it, because someone is going to be out there trying to copy you, compete with you, whatever it is, and you've got to be better than them and it's got to be a never ending drive to continue to be great at it. Now, sometimes you've got to pivot, but more often not, if you can find something you're great at, and there's a market fit for it, you're going to win.
Find Your Competitive Edge
You want the best. You want the people who can accelerate you, hat really know what you're trying to accomplish, that fit the vision. Because you're moving forward, you're trying to speed up, like we talked about. And then there were things that aren't part of those core competencies that if you bring in somebody that thinks they're a superstar but is outside the realm and they're there for whatever reason, maybe you have one customer you're trying to take care of. You don't want to necessarily pay for somebody because they're going to cause a lot of stress. They're going to have personal expectations. And so I guess maybe a better way to say it may be, outside your core competency. You better make sure that their vision, this new employee's vision, aligns with your vision, which is the culture fit.
Because if they're there and they're just doing their job, because you still need nine to fivers. The way I always say it, you need people that if you tell them to do A, B, and C, they do A, B, and C perfectly. Those are stress reducers. There are some where you tell them A, B, and C and they see D, E, and F. And you need some of that, but you don't want too much of that, because they in turn may not get the A, B, C done. And then there's some people that don't even pay attention to A, B, C, or D, E, F. They're in G, H, and I and they're trying to be a visionary.
Unless you're trying to put them in a visionary position, they're a problem. They're not a culture fit because you can't have conflict on what the vision of the company is. And so you've got to hire the right people for the right roles. And when, in doubt, at their outside, where you really need to have everything going, your core competency, get people who really are stress reducers that fit in the culture, because they're going to help. They're going to be the glue guys. Like on a basketball team, you need the glue guys that know their role, the people who are going to dive for the ball, that are going to rebound, that may not get all the glory, but those people are the people you can't live without. Those are the people that you're giving raises to even though they may not have asked for it because you know and you recognize very quickly you can't live without them.
I talked about the A, B, C person, but there's those people who create stress and those people who remove stress. And more often than not the people who create stress, create this hurricane that they can solve and only they alone can solve and they think they're your biggest stress reliever when in reality they cause you more headaches than anybody. And then on the other hand, there are people who seek out your pain points and your stress points and just solve them and don't make a big deal about it, and they're the ones that you can't live without. And so, as an entrepreneur, you have to recognize who is who. And there's the old saying, "Hire slow and fire fast." Once you realize that somebody is a stress creator, you have to get rid of them, because they infect other people.
In basketball, I always talk about, you can have one knucklehead because they fit the culture, but the minute you have two, they hang out together and infect a culture. And stress creators are the same way. They're just a whirlwind and they create things that only they can solve, which don't necessarily match up with the goals of the company.
There's got to be value in return on everything you do as a startup, and if you don't recognize that, that's a red flag.
Open Offices
There was a time when people would try to use their office as a way to show that they were successful. "Look at my office, I've got this oak or this or whatever." And our offices were always dumps, and I mean that in the kindest way.
We would have open offices. We would have side-by-side cubicles. I was a big believer in the old HP management by walking around, that I want to be able to see everybody. Because in a start-up, you can feel an energy. It's like going to a Mavs game and you feel the energy when you walk into the arena, back when we had fans, when there's a game and you feel that energy. In a start-up, you can feel that energy too. It's like electricity that's in the air that invigorates everybody that's there, and if it doesn't, you have an indication of their fit. And so by doing all these ancillary things that aren't a creative, you're just making things more difficult.
My first company, Micro Solutions, my first office was one of my distributors that I was buying from said, "Look, you've got to have something." And so they had an extra room that when the distributor's son wasn't using it to practice his Spanish I was allowed to use it, so I had to schedule a time. So that was my first office.
I like the energy. I like the management by walking around. I like open doors. I wanted everybody to feel good about talking and being focused, because with privacy, particularly as you're getting to a point where you're at 50, 100 employees and right in that range, right? People tend to really get territorial, right? And you're starting to have more management and you're starting to be more vertical.
And I really want to have the openness. There's going to be a point in time where you're going to have offices, right? And people are going to have privacy. But if you're in that 50 to 100 employee level, cubicles, I mean, when I got to the Mavericks, for years I didn't have an office. I mean, I had, when I first got there, it was a desk right next to all the salespeople in the sales bullpen. And it was just like, "Look, I've got the list of former customers. I'm going to be making sales calls right next to you and we're going to try to bring people back to games." When it was AudioNet, broadcast.com, it was the same way until we got into the hundreds of employees and then, okay, your lawyer needed some privacy and stuff like that.
But if you're in that 50 to 100 employee range, open office, cheaper office, warehouse space, going to Staples and getting... I mean, literally, I don't think I spent more than $29 on a desk the entire time we have broadcast.com
Make Work Enjoyable
Now, the way we used to make it fun in the '80s is a lot different than making fun in the 2021s. But yeah, I mean, you want people to want to go to work. You want comradery. I don't care if it's a game of Jenga, right? I don't care if it's a competition. I don't care if you game-ify something, but people in a startup in particular, there's always a significant amount of stress, right? There's always going to be expectations. There's always going to be uncertainty. There's always going to be hope. But around that stress, you want to be able to give people a way to relieve it. And particularly now when everything is remote and from home, right, you've got to find ways to connect to people so that they can have some fun and enjoy the fact that they're working for you.
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