Gary Kusin - Founder of GameStop | When You Lose Everything

I know how to make money and I proved that over a long really good career. I really press on hard analysis. Hard analysis doesn't mean you're going to get it right, but it sure beats having a dream. So you need a few things. You need a real product that appeals to an age group that's young enough that it overwhelms them and you need to have scarcity because that's the real way that you build the relationship with your customers having what they want when they wanted it at a price they think is fair. 13 people of our turnaround team went on to become CDOs. That's a world-class team. The self-awareness slash narcissism, that's the other part of it because God forbid you become successful. Sometimes look out the window, sometimes you need to look at a mirror. Welcome to Success Story. I'm your host, Scott Clary. The Success Story podcast is part of the HubSpot podcast network. Now, HubSpot is the resource that you need to tap into if you are an entrepreneur. 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You have had some incredible success. We're going to talk about Laura Mercy. We're going to talk about GameStop. We're going to talk about kinkos. We're going to talk about when you had portfolio companies, when you move from operator to capital allocator with private equity. We can talk about the book. We can talk about your podcast. We can talk about all of it. But when you look back at everything, you've had lots of successes, tons of failures too. When I say what was your most notable, your most, I guess, jarring failure that you learned from over your career. What's the first thought that comes to mind? There's no question. First, second and third, when I learned while sitting in the Austin airport that when I left GameStop, just after 13 years in, was two years into Laura Mercy, the cosmetics company, and it just left an electronic arts board meeting. I had been using my stock, my stock had some real value when I left GameStop, and I used that so I was, decided to start borrowing on margin scratch surface and would never my, you know, my, where I got in trouble would be at 10% of the lowest stock price it had recorded since we'd gone public. So I never paid attention to it. And I knew it was a great long-term investment. Sit down the Austin airport. There's a Wall Street Journal sitting next to me. I pick it up while I'm waiting for my flight and I look at it and see that GameStop was under a dollar. And I realized, why didn't I get a margin call? Oh my God, I may be broke because I was on that margin up to, I don't know, $8 million dollars. And I was clearly busted to covenant and no one had called, no one had notified me, no one had anything. And I sat there and went, oh, shit, I'm broke. How could that, how could I've gone to where I just was five minutes ago to that, to this moment? I would go, I went the bathroom and threw up. I didn't know what to do. And that was my, that's been the worst moment of my career. And as it ended up, I did the right thing and it managed to rescue me from the whole, from everything. So, but nevertheless, that was a very rough night, you know, kidding. What was the, what was the right thing that got you out of that? The right thing was I called the president of the bank who had my business. And I said, Ron, I need to let you know something because you guys did let me know. I just looked at the stock page Wall Street Journal and looked at, looked at it. And then it was called NeoStar Retail Group, looked at the stock price for the company. And it's way below the threshold where you guys could have conducted a margin call. It's, I'm waiting. No, you didn't. And you should have. And I'm going, I'd like to come in with my hat in my hand and try and figure out some way to get through this. What he said, when I got there for that meeting, he said, yeah, as soon as you get home, you know, you, I need to see you and went up there, big conference room full of people. And he said, tell this group what you told me. And I reiterated the story. And he said, nobody in this room has ever had anyone who had a loan that was secured by anything, and busted a cover of covenant, come in and self disclose. And we have no experience with this. So here's what I'm going to say to you, how long do you think it will take you to get this sorted out? And I said, you know, it could take me a year. And he said, then you got a year. We don't, we, we would have in the normal course of business. Yeah, we'd have sold your stock to cover that. And we missed it. And since you self reported, we're going to give you time. And then I went to my accountant, I had had two appointments. And then I went straight to my tax attorney, tax attorney, who guys don't bid all my taxes forever. He said, you can do three things. You can sell large mercy, a cosmetics, you can sell your house at a big high value house. And you can go get a real job that pays you because I wasn't taking any money out of large mercy at that time. He said, those are your three choices. And you're going to need to do two of the three of them. And I was so pissed off that I put not just me, but my family, my personal finances and this sort of jeopardy. I said, screw it. I'll do all three of them. I sold large mercy. I sold the house and I got myself a big paying job and dug myself out of it. And the job was in Atlanta, Georgia. And I said, that's fine. I'll commute there. Fly there on Sunday night, get back on Thursday night. I I screwed up. I did, you know, I did the crime. I'm going to do the time. And I really punished myself over that for a long time. And you can imagine I have no debt ever yet. You know, I took care of that. I got completely square and sooner than a year, paid them back, paid everyone back on everything and even ended up doing pretty well. We had the situation I was in at that time, way before Kinko's or anything else. So that's the worst. That's not, that's not fun. No, I don't wish that on anybody. I don't think a lot of people would, I don't know how many people would be able to navigate through that. Like in hindsight, it sounds, it sounds like you did it very gracefully. I mean, you sold the company, he sold the house. That's not, that's not the normal playbook. And got a real job. And as it happened, that next real job was incredibly lucrative. And that was before Kinko. So I mean, I got myself, I got myself back in the fairway, but yeah, but every day I looked in the mirror when I woke up, I was pissed at myself. That was just like, I was a knucklehead thing to do. Everything about it. Because the stock price had gone up to, I the last time I looked, it was 30. And look, it's about 50. You know, that's, uh, sickening. You know, like this high risk, this, like obviously you had, you had a, you had a propensity for risk. You didn't mind taking risk. And I think there's a lot of benefits to that. But I mean, sometimes it bites you in the ass too. But do you think that that risk over your career served you more than, than hurt you? Yeah. No, I'm not, I laugh. Because I, two things are true. Sometimes people don't, and also find that this two things thing, a lot of people can't get their head around. Two things to be true. I know how to make money. And I improve that over a long, really good career. I also know how to lose money. And I, and I prove that, and prove that over a long career because I'm an investor, it's start up and, you know, I invest in an array of things that I can have something I've been highly. Feel very strongly about, let's say, an over-invest in it. And every bit of it goes away. So, you know, I've had hundred badgers, and I've had a lot of them that go to zero. And so, yeah, am I high, am I, I, I, wire rack was I when I was younger? Yes. But the big, when I made my big score, we sat down with our financial folks. And we, we agreed how much will you take away for me to ensure that if I get run over by bus tomorrow, my family, you know, my future and all that, it's all taking care of, and I can't touch it. We agreed with that. Then we took what's left and said, got for me, don't knock yourself out. Keep doing what you've been doing, invest in what you like to invest in and, and do that. So, I did, but I've been more judicious, shall we say ever since. And the pattern recognition thing has enabled me to learn enough that I think I'm a better, I'm better at evaluating opportunities now than I was probably earlier in my career. And you mean that across, you know, starting something new, investing in something, taking on a role, like I mean, pattern recognition is, is huge. It just sucks that you had to go through that to get to the point where you reckon that's the pattern. And I would even ask, you know, we're trying to give advice to people at our earlier stage, well, okay, pattern recognition is great after you've gone through that shit. And then you come in on the other side, how do you maybe remove some of those pieces so that, yeah, pattern recognition is important. But somebody who's sold their company exited, how did they out of they navigate that? Because there's no playbook for post exit. Yeah, I, I think the most important thing we did, and I just mentioned it, was with, with a, someone we really trusted, a really important asset manager kind of person, we all agreed on how much I would, and we call it throwing over the fence, you know, make a bunch of money, how much should go there where I can't get to it. I, I literally said, I can't, I can't get to that. That's unavailable to me. This is what I have to invest in being able to take a step back and say, don't you can't put it all at risk. Don't do that. Put away enough on your first big score that'll take care of you till you die. You know, and then you can monkey with the percentages as you get older and you see more opportunities and you feel more strongly about your ability to to realize something might really be good versus maybe not so good. So that's how I do it. And we call it literally throwing it over the fence. Yeah, and not smart. Let's, I want to, we'll talk more about how you invest and how you, you know, how you do your due diligence on startups and some of the, some of the opportunities you put money into. But before we get ahead of ourselves, obviously we have to go back to the beginning. So I didn't realize this because I'm probably too young, but GameStop was not always called GameStop. So to talk to me, how do you pronounce that? I thought first of all is Babbage, Babbage's. Babbage after, named after Charles, Babbage. Yeah, an 18th century mathematician and entrepreneur in Victorian England. He invented stuff like the cow catcher on the front railroad cars. He also invented something that his first big invention was called the difference engine. And his second was called the analytic engine. And they were both the precursors of today's computers. And he essentially figured out he could weave numbers much like a jack hard loom. Weaves fabric. He could do that with numbers. His girlfriend at the time was a woman named Lady Ada Lovelace. She was Lord Byron's daughter. As she helped him by developing the punch cards that he'd built to use his biggest sadness in his life was he died before he could make it work properly. While all of this is important, it's because then this will shock you because of your age. And when we started Babbage's, which became GameStop, no, we couldn't use the word software. Number one, no one knew what software was. It was not in the vernacular. And nine out of 10 people thought it was intimate apparel. Thought it was women's intimate apparel. And if they did know what the word software was, they were incredibly intimidated by it because it was such a big IBM. It was such a big thing that no one wanted any part of it. So what we were trying to do with our first name was find a way to explain what we do in a way that people will come into our store. So we showed never ending loops of gameplay on early video game machines on monitors in front of the store with the big picture in the back of the difference engine and a plaque with Charles Babbage's name. Well, six years later, everyone knew what software was. And that so and no one still knew like you, who Charles Babbage was, but everyone knew you get you. I mean, we were doing we were doing $400 million under the name Babbage. So it's not like people didn't find us. They found it and came to us in droves because we were the first video game store in the world. And so wherever we showed up, lines showed up to get to our product. But we had the opportunity when we bought software, et cetera, stores in Minneapolis. They aren't their only thing was we will not be part of a company that's called Babbage's. And our thing was we will not be part of a company called software, et cetera. But we made it a merger of equals with the agreement being we'll come up at the new night for the combined entity. And we shut them down in Minneapolis, moved them to Texas. And then I left to start Laura Merciate, my partner co-founder became chairman and CEO and their CEO became president of the combined companies. And that was how it got it. That's how the game stopped. I got it. When you think about being a first mover in the video game space, it was a brick and mortar play originally, right? You just you're opening up a brick and mortar. Yeah. So there wasn't digital. There wasn't. Yeah. That's fair. Yeah. I'm just different question. I just do it. So what do you think, you know, prof did you to open up a video and you have a background in it? Did you come from it? Did you enjoy video games? Great question. And the reason I like focusing on this is it informed my strategy and starting cosmetics, and it really informs the way I look at new business plans for startups. Okay. So my co-founder and I were both classmates in business school. He finished top of the class and they were kind of the other book end, but we were best friends. We played poker every Friday night with the group of guys. We were very good friends. So of course, what happens when you're number one in business school, you get to go to Bain or McKinsey or one of those places. And sure enough, he became a senior partner at Bain very quickly when we graduated. I went the retail route. I went to a department store business mainly because the woman I was going to ask to marry me wanted to live in San Francisco. And that was the only job I could find at San Francisco. So I became a department store guy and developed it. So we come together four years later. And I'm talking about why I think department stores are doing because specialty stores are emerging from the limited the gap. The sales joy you name them. Specialty stores became dominant channels and distribution of any product of consumer goods that reached measurable size. And it was of course always the highest margin businesses. And they were taking our lunch from department stores. And I was in a very successful division of Macy's and I was the top merchant in it. And you could kind of see him lumbering towards a swamp. Well, Jim had replanted himself in the Silicon Valley for Boston. And his clients were early video game companies, Activision, Electronic Arts. So he was very excited when we met to tell me about this new way of entertainment. And if you go all the way back to black and white TVs, you go to early high five stereo, you go to beta max, you go to every single category of consumer entertainment goes through a hockey stick. And everything that he pulled together relative to Moore's law, what was happening with semiconductor chip technology and the curve on which delivered higher graphics, better gameplay, more speed. He said there's going to be a battle and there going to be multiple video game hardware units out there, each with their own specialized software. And he said, it's going to be a free for all to see who's going to win this. Well, that was just like when high five when stereo's first came out, they sold in JC pennies and sears and department stores. And then people started saying, well, this is great, but where are the records? Where's, where's software? Where's content? Yeah. And this department stores didn't know how to they would put four records up there. But then record store chains emerged when video, when digital movies came out, a blockbuster emerged. And so I was saying, Jim, everything he was telling me about what would be the penetration video game machines in the home, their main computers and the homes and software for each hardware type. I said, Jim, this is screaming for its own software specialty store. And we need to get a first mover advantage and you need to quit your job at bay. I need to quit my job at May season. Let's let's go make a run at this site. It was an incredibly well informed decision. I mean, we went to the consumer electronics show in January in 1983 when there was kind of nobody there in Las Vegas. And we went to see all the video game. And I got to talk to all of them because I really was kind of the virtue of the between Jim and me. And we both came back very excited. So and I guess I'm explaining it so broadly because we did our homework. We didn't wake up in the morning and say, I have a passion. You know, it's something. I have a passion for women's jewelry or or Jim and I weren't gamers. But we had a passion for what we thought would be a nascent industry that would grow very rapidly. And you know, I think that people are really given a disservice when they're told in college, follow your passion. Well, it's like waste management CEO. That wouldn't, that wouldn't their passion. But you know, I've been pretty darn well with it. And in that. But so one of the things I always look for is was their disciplined analysis upfront. They could talk about size of the sector growth rates in the sector. Why what you your vision is different than anyone else's vision on and on and on. I really press on hard analysis. Hard analysis doesn't mean you're going to get it right. But it should be having a dream. And a lot and a lot you would not believe the number of startups that have visionary entrepreneurial founders who talk about their dream vision that they're listening to that and makes. And I'm sure that's good for some people. And a lot of them have made a lot of money doing it. I'm not an investor for that kind of startup. Hey guys, Scott here. I just wanted to take a quick moment to say a heartfelt thanks to every single one of you six years of this show. And it's really all because of you. Your listens, your support, your shares, it's what keeps this thing going. When I started, I had no idea how big this would get, how many lives we touch, the stories we share, the lessons that we learn together. It's truly humbling. And I believe that we're building something really special here. A community where no one has to reinvent the wheel. We're all in this together learning and growing. And here's my ask. If you love this show, it's made a difference for you, please share it with somebody who needs it. Hella friend, host on social, whatever works, it's the best way to keep this thing going strong, bring on even better guests and share more life, changing wisdom. And you can find us on all the spots. So you can go to successstorypodcast.com. If you like listening to podcasts, if you like video, you can go to YouTube. It's youtube.com slash C slash Scott Declary or the newsletter newsletter dot Scott Declary.com just spread the word. I'm eternally grateful for each and every one of you. Let's keep learning, let's keep growing and let's keep making this world a little bit better together. All right, let's get back to the show. I think that I think that I mean, everybody wants to be an entrepreneur, right? And everybody everybody wants to be an entrepreneur, even though they don't understand how much work it's going to take them. So you have sort of two sorts of entrepreneurs. You have people that try and productize a skill set that they have, which is not a bad thing, but it's not, it's not going to be a disruptive blue ocean that they're going to be going into. There's going to be a hundred other thousand people. Yeah, it's hard to promote. Yeah. Unless you're so exceptionally qualified. But then even then you have to build the brand or yourself. There's going to be, you know, 10 to 15 years of building that that proof in the market. The other type of entrepreneur, which I bought you, there's three types. So the incorrect type is the one that, like you said, the visionary, the dreamer that wants to be the Stanford dropout that's going to go build the next thing, right? I think the most successful entrepreneur statistically as well, I don't need just me, you know, my musings. It's the person who solves a problem in the industry they've worked in since they were like 20 years old. And they notice that one thing doesn't work. Now that's hard because that means that you need patience to be an entrepreneur. You have to be around long enough to know that there's a problem that exists. But you kind of fast track that a little bit. You didn't, you didn't live in in video gaming until you were 45 and then try and build a company that's all the problem in video games, right? So that's another, what I guess I would ask, what are the main signals that you look for from an outsider coming into an industry that indicates a potentially emerging market? Because I'm going to go ahead and assume you copied and pasted the strategy with Laura Mercy because you did not have this love for cosmetics coming out of GameStop. Well, but I did have all responsibility for all cosmetics at Macy's in for the division of Macy's that I was a senior merchant in for four years. So I knew about cosmetics. So let's just to be clear on that when it wasn't I didn't just kind of fall up in that sense. I had been involved and I was highly curious about the roots of the cosmetics industry. I already understood how cosmetics emerged as a consumer preference from the 1930s when a makeup artist named Estee Lauder started putting makeup on movie star spaces and said, wow, I could make a company out of this and her husband Joe helped her and that next thing you know, Estee Lauder was well and I learned about how the cosmetics industry went from makeup artists to scientific technology to fashion and all of a sudden when I heard makeup artists are coming back and play again, I went, whoa, everything old is new again. If that's true, here will be the next stages of it. And so I was able to come to a plan. Let me find a makeup artist and I found a woman named Laura Mercy. So I mean, it was it was the same. That was how I came up with that. So I'm not I'm not from this industry. So Laura Mercy was and you know, my girlfriend's probably going to kick my ass for asking this question. So she was she was a real person. She will I promise you. Yes, she was. She was a real person. She remains until today, a real person. She was doing Madonna's. She was Madonna's makeup artist. She was Angelina Jolie's makeup artist. She she's makeup artist to a bunch of movie stars and rock stars. And when Bo would run a fashion model on their cover, they would ask she's a real. So what we did is we said, Hey, we will put you in the lab. We'll do a license agreement with you. We'll pay for all the development. You need your own life under your name. And we'll take care of everything else. And I got myself a co-founder, out of Neiman Marcus who did who was current very current in cosmetics and she and I ran that. So this is what every YouTube makeup artist is now trying to do. This is the same playbook. Yeah. Yeah. Seeing it done it. Been there. It's been a lot harder than it seems in the graveyard school. When you look at the brands you built, so Laura Mercy A from somebody who doesn't know makeup knows knows a little bit about Laura Mercy A. So I'm assuming it's a very popular say the global it's a it's a very top global high high end fashion brand. And when you look at like the evangelism and the loyalty that you've built with the customer base for Laura Mercy A and GameStop, what do you think the secret is in building the the fan base of a company so that it goes global. It's not just a great product. There has to be something else to it. Again, a GameStop I have to put in a class by itself. And the reason why is no one understood what happened when that became a meme stock. They didn't understand how can this be happening. The relationship with GameStop and its customers it is extraordinary and was extraordinary so that in for gamers in their 20s 30s and 40s GameStop was part of the fabric of their lives. They measure time by product releases. They measured time by when they showed up at midnight at a GameStop to stand in line with free and freezing weather with their mothers having taken them there to pick up a game that was going to drop at midnight. No one understood. Everyone talks about fans and everyone talks about building a relationship with your customers. There is another level and it is it asks Swifties, ask Taylor Swift fans and ask Beyoncé fans. They get it. There are legions of people around the world who mark events in their lives by Beyoncé releases new albums and that's the relationship and it was unique in all the world that consumer goods in the 90s and 2000s between GameStop's customers and GameStop. So when all of a sudden a hedge fund, we know one knows how to spell hedge fund but they're all on Reddit together and they're gamers and they talk their trash on Reddit. Someone is trying to do what to this company that has been part of my life since I was nine years old. Hell no. What do I have to do to stop that by the tens of millions of people? That's a relationship that no one could have seen or known. Jim and I knew it was we founded it. We'd never seen the way the way customers glammed onto the company. We were not surprised to see it but the rest of the world wasn't so was Wall Street. Do you think that there's even one tip that you could give for somebody who would want to build? It seems like it's an impossible question to answer but I am curious if you have some insight as to what makes a company to that degree so intricately tied to a fan. So I think it's a combination of a few things. Not the least of which was new product introductions and new game releases and while that was important is it did not take long maybe four years. The only company bigger than us even as badges was Walmart. Toys are us. We were kind of the same size as Toys are us but Walmart was bigger so we could get outsized deliveries of product which is critically important if you're dying to have a new game and you know it drops at midnight and you know GameStop will have it. You also know that Walmart can't get their act together to be open at midnight much less and bought enough stores or distributed it correctly. We had such refined systems that we knew how to get the product where the customers work for that product so they had a better hip rate than anyone else any other retailer for these game launches and we got that feedback from the market and the better we did the better we did because we could make the argument to Nintendo that instead of needing 15,000 new hardware pieces of hardware for their new Nintendo game system that we could get 24,000 and we would have trucks at the dock when the ships unloaded onto our trucks. Our standard was I can't remember what our standard was there was something like 50% of our stores would have the new title within six hours of it being unloaded off of a ship. We rented planes. We rented trucks. We did everything so we could deliver for our customers. Well that builds a customer relationship. Pretty unique. I don't think I don't care how good our mercy is as an example. I don't think she could bring out a color that people are going to line up more and fight over. I don't think bed bath and beyond is going to come up with a thread sheet that people are going to be so crazy. So you need a few things. You need a real product that appeals to an age group that's young enough that it overwhelms them and you need to have scarcity because that's the real way that you build a relationship with your customers having what they want when they wanted it at a price that they think is fair. And I think there's a cultural component too. I think there's this this like X factor. Oh by the way, our store managers and people that worked in our stores. Do you know how easy it was for us to find people? Gamers flocked to say, said, I'll work for free. Can you just hire me? Well, we never let people work for free. But we didn't have the problem that other places might have and being able to staff their stores. People would chill for them. We turned out monthly teaching tools to teach our people how to do it. We had a checkout system where people who worked in our stores could check out a new game and go home and play it. So when they come so when someone comes in straight, tell me about this game. Doon what what's that about her? What's world of warcraft about art? You know, they had salespeople who were every bit as enthusiastic as they were. Maybe they had already come up with some Easter eggs or some hacks in the game that they could share with the customer. Look when you get to this level. Here's what you do. Yeah. That relationship goal and we had competitors who could talk about that, but they didn't deliver it. And we did. And that's yet another reason. Gamers like hanging out in the store. They like talking with people who work here because you know, there's simpatico. You know, it was just it was a very special relationship. So difference between what you did at GameStop, which was very blue ocean, very tactical. And when you brought that company to market, Laura Mercier, you're very tactical, but cosmetics was not blue ocean. Cosmetics is red ocean. Super saturated. What's what's the difference in how you took Laura Mercier to market? Was it the was it the original influencer with Laura Mercier or was it something else that made it successful? I think it was mostly that and the white cosmetics are distributed. You always start at the top, meaning you've got to be able to get Henry Bendels or Burgdorf Goodman or Neiman Marcus. There are a lot of people who want to carry it, but if they carry it, it dilutes your brand. So it's not enough to know who you have to sell it to. They got to buy it. And then they got to present it in a place on the store in their on their floor that suggests to the to their customers, whoa, this must really be a hot new thing. So lots of that kind of stuff in the cosmetics business. And once you've been in Neiman's and once you've been in fact, three years later, you can go to the high end department stores. You can start going into other channels, but you get, but the distribution model is pretty set that only trick is getting the large retailers to agree to play their role. But for a consumer good, like anyone who's listening to this is going to be like, Hey, Gary, it's not that easy to get into Neiman Marcus with a new cosmetic product. So what was it? What was the thing that a lot? Was it your track record? It was back then. No, we could point to a line called Mac Macy, which was a Canadian line called Makeup Artist Cosmetics Macy. So Mac and then Estee Lauder had already bought a company called Bobby Brown doing the exact same thing. Bobby Brown's a makeup artist. And then there was only one other makeup artist, Trish McAvoy. And that was it. And then Larmercy was the third. And today, the reason that it's so hard is, yeah, there are about a thousand makeup artists out there now. You have to, I am a big fan of first mover when you see the wind changing in a business and that's what was happening when I jumped in with Larmercy. That makes sense. So you wouldn't go into them. You wouldn't go into cosmetics and make up today. I can't tell you the number of cosmetic companies I've been asked to be on the board. I did go all one because they had a really interesting twist and extraordinarily successful. But, but yes. So no, the answer is no. Mean cosmetics. Okay. So then, okay. So now you had to sell Larmercy to bring it back to the first story you were talking about. So you had to sell Larmercy. That's not a fun. It's not a fun thing to go through. So post Larmercy. Holy shit. So just walk me through. You sold Larmercy. I sold your house. What was the third thing you had to do? Get a job that paid real. Get a job. That wasn't King Coast yet. That was another company. No, that was another company and there's this recruiter who wanted me to meet with two junior apparel companies that were public and the deal was, I was supposed to pick which one of them I wanted to join the board on. So this is happening in parallel with this other stuff. I had been responsible for all junior sportswear in the department store business. So I had a big and successful background in cosmetics and junior sportswear things like that. I decided I didn't want to join either of boards. I didn't like the companies. I didn't like anything about them and didn't feel like that would I would be happy there. And he was, of course, pissed off. He said, I promised him you'd pick one. I didn't know which one that you're saying you don't want either one of them. That's like being on their baby. And at this time, at this point, you have no money either. The technical, nobody, no money. So he said, so he called me a week later. He said, you owe me one. He said, there's this company called Car America based in Washington, BC. They've been around for over 100 years. They are a reek. They own a bunch of, I couldn't spell reek. I mean, that's how that's how bad I was. But they said they only serviced out office operation. They bought it. It was, they think we were, you know, just cut to what it is. It was like we were. And he said, we want to roll up with, there's lots of franchises in Europe. There's lots of this. I want to roll up all this stuff. And I met the guy, he and I had gone the same graduate business school and we hit it off famously. And I said, look, you know, if you've got some good support staff around here, I'm real happy to think about this. And I jumped in and we quickly, we made 46 acquisitions in like the first 18 months so that by that point, there were only three big companies left in the world, one in Australia, one in the UK and our company. The one, the company that was second biggest in the US came to us and said, we would like to buy you all one condition. We need your management team to take over the combined company. So Tom Carrick, our America, I mean, when we got the numbers, it was like telephone book numbers for me. It was an unbelievable school. I just really crazy real estate kind of return. But on the other hand, we had almost, it was almost 50 acquisitions. Yeah, we've done a lot to build an organization. And so we sure enough merge and we've my team took over. I moved it to Dallas and life was good except the new owner that they had bought us this number two. I didn't like their chairman just brought it for an array of reasons. And I, but I thought I could sell it again. And he agreed. I said, look, there's now there's three of us. I know the owners and the founders of these other two really well, why don't you let me take a crack at selling it to one or the other. And we can make a big return just because we got a merge company. And he said, great. And so I start working on it. And it was harder than I thought because the founder, founder wanted to me to pay the price I needed from him or let our people stay, you know, all that kind of stuff that gets caught up in those negotiations. So at the same time, I was made aware of the kinkos opening. And I'd had lots of laps around the track by this time. And kinkos had one foot in the grave the prior 12 months before I started. It had lost 11 million of EBITDA. And the pee for them that owned it said, you know, there's something in my contract that if I suggested that we just needed to shut it down after nine months, I would be assured I would get a good pay out just because they could cut to the chase. But that's my baby. When you asked about my whole career, kinkos was, I just want to take a second and think the HubSpot podcast network for supporting success story, the HubSpot podcast network has incredible podcasts like the product boss hosted by Jacqueline Snyder and Mina Kuhnlo Sithep. If you want to take your physical product sales and strategy to the next level to create your dream life, you need to listen to the product boss. They sit down for an hour. They do a workshop style podcast. They're going to talk about everything that you need to know to uplevel yourself, social media, marketing. If you're a consumer package goods, if you have any sort of physical widget, you need to tune into the product boss wherever you get your podcasts. It's so funny because it's not even what you were known. So the founder of kinkos, he sold his private equity firm and then in traditional private equity firm, that's it. It seems to go in the wrong direction after it gets acquired by a private equity firm. But this was for something that was notable and they missed. The reason it went into the crapper was because they don't do it. Big P firms, especially those that are organized around operations, tend to believe that command and control will always win the day. We will figure out what we have to do operationally and then we'll force it into the company. There's really only two kinds of operational styles, if you will. There is the academy company command and control. By the way, the CEO they brought in had been the CEO of Sam's Club. But when I started calling kinkos, the people's Republic of Kinkos, the P firms started to get it. I happened to be an entrepreneur. I happened to embrace the history of kinkos. I just had to get them to understand that where we were was not a tenable place to be. I was able and it's all in there. It's all in the book. I got that minus 11 million EBITDA. First 12 months on the job plus 120 million of EBITDA. Year two plus 180 million of EBITDA. Year three, two thirds of the way through the year, we're mapping at 240 million of EBITDA. That's when Fred Smith walked through my door. We figured it out and it was a great team. It was a team effort, but I had enough pattern recognition in my background to understand what I needed to do to start the wheels moving for a mega turnaround and it worked. They've been lucky, but it was pretty amazing. I don't think business, you know, we're laughing before we started recording, because you wrote a book that's more like a business book versus a memoir and we're talking about your editor. He's pushing back on the fact that as you're writing your memoir, you say, I got lucky. I fell up. I'm listening to you now. When it doesn't sound like anything was that lucky, it sounds like you knew what you were doing again and again and again and again. I mean, you don't look into, listen, that's correct. But you know what you do. You build a great team. When I say great team, this is another one of my proudest moments in business. 13 last count, 13 people of our turnaround team went on to become CEOs. That's a world class team and how we recruited them, got them all bored and all and harness that energy is a book in itself. But the real book is, and this is something that I picked up along the way and it was my pattern recognition. When all I heard from everyone, when I'd say, what's going on? What's wrong? How this, how this gets so bad? Everyone would say it's just, it's a bunch of things. You know, everybody was completely demoralized. It's so many things. And Napoleon is sometimes credited with setting. If you want to know what's going on at the front lines, go look. I'm a big believer in that. I personally walked over 700 malls in America getting bad edges slash GameStop up and running in the right locations, not just locations for mall locations inside of them all. That's what I did and what I've done and everything I've ever done in my career is it's time I rear into an airplane and I get out there meet people. So when, when I started at Kingco's, I told everyone at the home offices in Ventura, California, I'm gone for the next six weeks. I'm going into all 42 regions in America in every market. I'm going to run town halls across all three shifts and I'm going to be asking, we had 25,000 employees, I'm going to be asking every employee at Kingco's, what and a heck happened around here and what and a heck do we have to do to fix it? And by the time I was done, they knew what to do. The store managers, it didn't matter where they're always in Seattle or Miami. I heard the same story from everybody. And so I came back with the plan and we had put the plan in and the plan worked. And, and, and monumental turnaround and I used the other thing which no one believed, I sought out Paul Ornflut because that's kind of how I roll. I called them and, of course, he didn't want to talk to me because he hated everybody at CDNR. And he assumed I was another city. He didn't know what till I was doing. And I said, we didn't dodge me and just meet me for lunch here in Ventura. And he met me for lunch, and he came and loaded for beer. He pissed off his face with red. Four and a half hours later and into our second bottle of wine, he was just having a ball. And I worked, I worked through him also to get to a, and it's all, this all in the book what what we did, but he embraced everything that I was trying to do. And he loved the parts of the old kinkos which were gold, just gold. I brought them all back or I left them there. I wouldn't trade those for the world. And that's how you turn around a company. Everyone bought him because the plan was, we're going to do what all the manager said we should have done in the first place. That's what we're going to do. And it worked. And they always signed on for it. So it was, it was just very cool. Yeah, no, as I was, I was, I was reading this story before we jumped on. So Paul, Paul kissed you in front of 3,500 kinkos team, team members were hilarious. That's very funny. That was after the turnaround. That was after the turnaround. That was, that was going into the turnaround. He had bought into it. I had invited him to meet me after Ben Chura. He was banned from the stores. He wasn't allowed in the stores. But I've been, I've been invited to the Olympics and saw, like, sitting by Xerox. We were Xerox's biggest customer in the world. And I said, Paul, would you meet me and Salt Lake City? I'll take you on two of our stores. And he's like, why can't go in stores? They, well, let me, I said, Paul, I'm going to let you go in stores. So we went. And by the time we were done there, it was really clear. He and I had good chemistry. And I explained to him the whole turnaround plan. And he was, and he was saying, yeah, that's right thing to do. Yeah, that's right thing to do. He agreed with all of it. I said, what if we plan to surprise in our store managers meeting? And no one will know, but you and me, I'll announce you and you come out and talk to that. I said, they will go nuts. And he was so excited. He couldn't stand it. And that's when we, and everyone had told me, oh, he's so dyslexic. He's so 80 day. This is going to be the world's biggest disaster. He's going to go up there and talk for 30 minutes. They gave me 100 reasons, not to, to bring him on for this. And I said, guys, I need him. And I talked to Paul, or fun. I said, Hey, here's the book on you. You're going to take 30 minutes. You're going to promise 10. You're going to take 30. You're going to do this. Gary, I want to talk so badly. I promise you you can come out and you give me to hook yourself. But I will stay inside 10 minutes. I will say what you need me to say that. And so we were supposed to meet out in the middle in shake and this big stage in Las Vegas, 35 out of people. I announced him. And sure, not the place goes bonkers. And as we had planned, I walked from the podium to the middle of the stage to greet him. I was supposed to shake his hand and then exit the way he came out. And he would go to the podium and speak for 10 minutes. He stopped. I have my hand out. He didn't reach his hand out. He took my face and kissed me on the lips in the place. Of course, I'm stunned. But in my head, like I said, this is done. This went. This is a winner. He is endorsing the turnaround plan every single reason not to do this will fall away. When this company sees him, kiss me on the lips. I have been anointed by the Godfather. And I mean, I walked off and they said, see what happens. And I said, I did see what happened. And it was awesome. He's going to speak 30 minutes. I said, yeah, I can speak for an hour. It's this is game over guys. And it was. That's amazing. You know, now you now, wait, you have, you've joined private equity firm, correct? You after Kinko during it was owned by Clayton Du Boer and Rice. And then I would go to TPG after was going to ask because you've seen, you've seen the good and the bad when it comes to private equity firms and and founders selling their companies to the right and the wrong people. So what are some lessons that you've learned from Kinko's from any of the, from any of the transactions you've taken part in that you now I'm assuming with TPG try and do things right. So what are those lessons for an entrepreneur founder? So I, I was with TPG for 13 years. I just, but in 2000, 2019, I started a glide path out and I just left the last TP, the board that was of a TPG company a year ago. But so much, this is where the pattern recognition really started paying off because I had seen so much. I could tell so, so investment teams from PE firms going they meet with company and they tried to decide what is a good company, good fit, good reasons to buy them. And I would sit in the same management meetings they were sitting in and I would see things completely differently from what they were sitting. And so I guess because they weren't experienced enough to know that body language sucked around the management table. For instance, I went to one management presentation in Chicago once it had 12 members of the management team sitting in the front nine of them had their arms crossed almost the entire meeting rolling their eyes looking. I was toxic. And everyone said, this is a great company. We're going to buy it and I was like, whoa, whoa, whoa, guys. We need to rethink that. And so, compete firms, their P firms are not unlike the management styles. Command they control versant material. Essentially, I'd describe an entrepreneurial company as yes for forgiveness, not permission. There are PE firms that are very rigid in how they analyze companies and how they do their due diligence and they have a playbook. And I think that's a good thing. But if they don't execute to the playbook and have things like assess the culture, what what is our investment thesis? We've heard their investment thesis is ours aligned with theirs. Usually doesn't, by the way, usually with PE firms buy company, they think they miss something, either strategic roll up. I mean, they've got usually a different agenda than their target company. And I think that you just have to be very careful if you're distributing authority down that low that you've got really good people on the front line. And so, they end up doing the first time they have a bad transaction. It all starts going right back up to the top. And all of the sudden, people who thought they had a throating in one of the silos, technology, consumer, healthcare, you know, all of a sudden they get overridden in what's supposed to be the final investment review committee review that finally, you know, a founder says, I don't like it. We're not going to do it. Yeah. So, I know it was interesting. That was very interesting part of my career for sure. Well, I'm also curious on the flip side. So, now you have the advice from the perspective of the private equity firm on how to manage a relationship with the founder of the entrepreneur. But also, how do you make sure that the transaction does go through? It is a success because I have seen, I think I've seen outside of maybe companies that, you know, Google and Apple acquired because it's a very specific incubation style acquisition that they deploy so that the company doesn't get to basically even from the inside out. I think a lot of acquisitions don't go great. You've done a ton of them. What makes an acquisition go well versus not go well outside of like they miss something into diligence? Because that's an obvious. But say the company is performing well, it's profitable, company acquires it, starts to die kind of like what happened with Kinkos. How do you avoid that? It's, I'll oversimplify it, but it is truly, you talked to me about the team you assembled for this because typically it is very typical for a new owner, a P based owner to put in somebody they've hired into the seat yo job. It's as easy as missing at what Clayton DuBler and Rice did with the CEO of Samsung. You look at that and go, oh, gold them. They got a season seat yo, yeah, but he's a command and control guy. And you can just imagine when he walks into St. Louis and says, I'd like all of you to be blue and I noticed it's red, except the founder of St. Louis is now the district manager. And as soon as soon as the CEO leaves the market, he tells everyone disregard, we're not going to do that. And so if it's, if you get the wrong CEO, they build the wrong team, they build the wrong team. Now you've got insurrection and you've got people at the water cooler gossiping and you've got, you've got glass door blows up. You know, the team, the team is the single first point of the spirit of what can go wrong. But I'll tell you, you said it and you are right, more of them go wrong than go right, but I would add to that at the start. It is seldom that you see a smooth move from the day the acquisition closes to the day they sell it or distribute it or go public or whatever they're going to do. Because invariably they didn't miss something or they had to pivot into something or some part of the business would not be able to coexist with the new business that they wanted to launch because they thought that was a great opportunity in the marketplace. And it can be any number of things, but you can absolutely get the ball back in the fairway. If you're honest enough, if you're having lovely performance reviews in a company, so you have these monthly operating reviews and you have a template and all the members of the senior team, once a month they come together, everybody does go through their page. And if you can find things fast enough, you can react to them and impact the future. So I wouldn't, I wouldn't why say that, you know, they don't all go bad. They do go bad in the early days, more often than be firms ever expected they would. And now you're in a staying power. But it's about whether or not you can recover. It's the recovery. Yeah. And that's where you have to get real with yourself. You got to get honest. And you know, I have this other saying, call them cues into those. Sometimes you look out the window and sometimes you need to look in the mirror. And what you tend to find is many top management people in companies tend to look out the window when something goes bad. Oh my God, did you see what our competitors did? Oh my God, did you see what happened to our cost of goods? What happened? They seldom look in the mirror and say, what have I done to contribute to this and what am I going to do to help us get out of this? And if you've got a good culture with the senior team, that sort of behavior is reinforced by the CEO that, oh, wait, he's not shooting people when they do something wrong. We're all come together, we're going to put our heads together. How are we going to get through this? And then bet that kind of promotes more honesty and integrity among the senior team and you can get to that right answer. I love that. I want to, I want to just touch on a couple. If you have a second to do this, a couple like of the soft skills and ideas on personal development that you speak about in the book. And what we've gone into today is sort of just like we've done a little bit of memoir, a little bit of tactics. Before we sort of, I don't want to say pivot because it's all part of the same conversation. But if people actually want to go pick up this book, just give me, you know, for the listeners, what are they going to get out of it? Who's it for? So the book is really for anyone on their own journey and their career, it gives lots of ways to think about your journey and lots of ways to give you permission on your journey to do things your way. And I go into pretty great depth about that. But during my stories, I, and the book is more collection of stories than it is anything else. But there's stories where I learned something important. And the whole book builds to my six leadership principles, which emerged at the back end of my career as I thought about every single thing that I had seen good and bad along the way. What are a set of principles that could could be evergreen in a company? And by the time I left Kinkos, I had already installed these leadership principles. And I used them in my role at TPG, when I would be a lead director or a member of the, or I would talk with the CEO, not about mine as the definitive leadership principles, but you need leadership principles as a north star in your business. And let's talk about what is important to you. I'll tell you what was important to me, but that doesn't mean it's going to be right for you. But you get to, but if you can have open honest conversation about that. And I have to tell you, the one thing I'm sure of the leadership principles keep you, especially you can never be ready to face all the stuff you face in business. I spent 25 years as a CEO, first one thing than another. And I continued to see crap happen at the end of my 25th year that I couldn't believe that I would just say, you have got to be putting me on. How could this be happening? And so when I don't, I don't think people should reinvent the wheel. I think that if you understand when things that people would call soft, that we're going to have honesty and integrity, we're going to have respect for others. We're going to have open honest communications. That it just those three by themselves informs someone on what to do. If they just learned something, they wish they hadn't learned. Well, you know, we're going to have open honest communication. Then that means let's disclose. And of course, that comes back to my bank thing. I mean, everything will come back to something. And the book builds up not just to the leadership principles, but also the operational tactics, which I go into in the chapter before the last chapter. I love it. So the book, just so everybody knows is called always learning lessons on leveling up from GameStop to Laura Mercier. So that's going to be available at like literally anywhere you get books. I'm assuming. And we'll put everything in the show notes as well. You speak about a few different things, which you know, I've heard. So just to itemize them, you speak about emotional intelligence, you speak about continuous improvement, you speak about resilience, strategic thinking. These are all traits that we've heard before. I want your unique take on some of these traits. Some of the, maybe, maybe your opinions on them as to how they're useful, how they're not. And you can go one by one or whatever, because everyone's going to know continuous improvement. I don't think people are going to disagree with that. But why? Why is that so important? How is it? How is that helped you in your career? Sure. Well, start with continuous improvement. And by the way, my co founder, uh, Babbage's Slash GameStop, Jim McCurry, and we're talking about this adept, in that last week. And thank Jim has convinced me that I may need to think rethink continuous improvement and maybe drop improvement and make a continuous change because the world is changing wildly and dramatically and with, with a greater speed. The reason I've always said continuous improvement is you want to constantly be better at everything you're doing because that's a path to glory. If you think about scale, if you think about just improving year over year performance, continuous improvement is critical. But as Jim pointed out to me, yeah, it's critical, except sometimes you're so focused on the operational changes that are the operational improvements that you'd like to make that you miss major strategic imperatives that are changing right underneath you. In the case of video games, tell about a huge insight right now everybody thinks that's really, that's well, of course you do that by used video games and refurbished video game systems. That's a big idea. That's a very big idea. And it ended up being 500 million dollars of the profits of GameStop each year was simply their used sales and the refurbished hardware sales. But that's huge. Well, that's a change. That's not continuous improvement. That's a change. The migration after us out of the malls because the new leadership and this is not Gemini, these are the new leaders in the company saw the white power centers were starting to pop up all over America and it felt like the easiest cheapest high, highest ROI thing you could do to pivot out of major regional malls and into these power centers. That's a change because that's continuous change. You wouldn't have thought about that if you were just trying to improve operations. So those are those kinds of things. I do think the way I like hiring people who are going to report directly to me. If I, if during the course of an interview, I don't hear something like I want your job. If I don't hear that, that's a bad thing because I tell them I need someone who wants my job and then my job is to make them successful. And if they are successful, I'll do whatever I have to do to ensure they become a CEO. So that's important. But this other thing and then this is you'll laugh at this maybe, but I don't need someone to say I have a burning desire to win. If they have that, I think that's great. But I don't look for that. I look for someone who will refuse to lose. And that is a very different mindset than when at all costs. It refusing to lose suggests a tenacity, an aggressiveness, and an ego thing that simply no in the face of insurmountable odds yet keep coming back. That's different than I have to win because those kind of folks sometimes throw in the towel a little too quickly. So I like hearing either one, but I have to hear if I don't hear I've got a burning desire to win. I need to hear I refuse to lose somewhere I like that is critically important. I it's critically important. And then just this this whole leadership development and I in the reason I did this book and the reason I was doing this podcast with friend of mine, Jill Lewis is I started mentoring you know about 20 years ago and it came to me. I did not go to it. I didn't read a thing about mentoring, but people kind of wanted my opinion about stuff and that started growing to where now it's I've got over a thousand mentoring sessions. We actually went through my date books from the last 20 plus years. And so this feels to me like a way that I can mentor more broadly where I don't have to sit down at a lunch with one person. And that's between this and the podcast. This is stills me up. If I can if I can hear someone say, wow, good timing. Well, this I was faced with a particular issue and just reading this. I think I sorted my way through it. Well, that's a win. That's a win to me. And it's about leverage too, right? Like you're leveraging like audiences, you're leveraging technology to get the message out because you can hustle your way to the first milestone. But after that, it has to be leverage. You can't you can't mentor a million people with that. I mean, that is true. And it's also true. And when you talk about evaluating companies, you need to understand what scale is and you need to have some idea, does this company even know how they could leverage their scale? Yeah. And because that's a very important if you're deciding whether or not to make an investment, that's that's something you want good line of side on. You mentor a lot. That's actually an interesting point as a mentor. How do you choose a mentee as a mentee? How do you choose a mentor? Well, I do think that's a great one. And one that I've been pondering lately, actually. So again, I don't decide who to mentor. I am a very different. My background is episodic. So it's either someone I know or work for or someone that someone I know said, why you call Gary? And they essentially come to me and say, I've got the situation. Maybe you can help me think about it. That's how it comes in. And I might hear from them again three or four years later. And not before I don't have a regular mentoring relationship with anybody. And I never have. They do people just kind of come to me. And I like the episodic. I like to believe that perhaps over a lunch, I could ask enough questions. And I go into detail in the book about theocratic method of teaching. And I really embrace that. So and the danger of the word should. I simply ask questions. And if I do my job correctly with someone who's trying to solve something of importance in their life, they will have an aha moment when they come to the answer that's right for them. Because there isn't. There's never just one answer. There are an array of answers. And you just have to pick what's best for you. Very wise. I love it. And everybody always has the answer inside. They just need somebody to pull it out of the. We always know what we have to do. And it's not just it's giving them confidence to listen to themselves and to decide what might be right. I love when people because they almost it's almost like a like a cartoon. They they they sit up straighter. They're just kind of bows out their shoulders getting. I know what I'm going to do. And I like I love being in the situation where I can say, well, what is that? Because we haven't talked it hit them in their brain. And it resonated in a way that all of a sudden, they felt awesome. For me, that is success. And that builds me up. And that's what I've done. And that's what I want to keep doing. I love it. Okay. I have one last one last question to bring it home. You know, you look back over your entire career. You've had multiple successes. If you were going to tell your 20 year old self one thing, what would that thing be? It would have probably been the very aware of the impact of your choices and work on your family and on the growth and development of your kids and of your community. And I've been married 47 years. So I'm not I didn't I didn't fail to have a block. It could have been better. I could have been better. And that's that's probably this work like balance thing that everyone is complaining about. Which I'm seeking. All right. I'm not complaining so much about that as other people are. I do believe and tell people where look, if you're going to be in account and guess what March and April, you got to check out because you're around the clock. Or if you're in a Christmas business, guess what? Thanks, given the Christmas, you don't get to hang around. But you better find the time when you know, when you are around and when you and you need to like I always knew, I would be home. If I was in Dallas, I would be home at 545 at night. So I could have dinner. It's been the whole evening with the kids with their homework, bad, bad, putting them to bed and all that. I'd take it out the next morning. I've been known to be at my desk at three in the morning. But I have to be able to say these will be the blocks of time that I will not violate. And they are for my other interest. Then if you don't have a family or a small family, you've got something, whatever it is, whether it's a workout regime, whatever it is, you have to be able to tell your you've got to be able to compartmentalize your life in a way that you actually can do it, not go crazy. Yeah, you know, just on that point, do you think it's because you did it, you maintained a marriage, a family, you said you could have done parts of it better. Do you think that this is something that entrepreneurs struggle with that is not discussed or spoken about when they're getting started? This like one of like the sort of them, I don't know how to put it, like one of the negatives of entrepreneurship that people miss the mark on the most when they start to build their own thing. They don't understand like the commitment that it's going to take or do you think there's a version of entrepreneurship where you can have balance? I think it's all resident in the person. If if you're a person that is so obsessive about what you're doing, but you're not obsessive about your spouse or your family or your kid however you want to slice it up, well that that's sending a message that you need to know that you need to be aware of and you need to understand the implications of that on whatever those other things are. When I got, I got a call, it's been 15 years, 20 years, I got a call for American Airlines and they told me I was their number one flyer at the history of American Airlines and so I was thrilled that I've got a bunch of little planes all over my office except then when I thought about it, it's like, where am I so proud of that? I'm not, that's, that is not okay, that speaks to all of you and I had to live with that and I lived with it still. So I think know what your advice is and I think that work can be advice and building can be advice and know what your advice is because if you don't have the self-awareness it can destroy you even if you're building something incredible. Yeah and in the self-awareness slash narcissism that's the other part of it because God forbid you become successful and all of a sudden you have more money than you've ever had. You got way more money than you need or can spend and maybe you start believing your own press clippings and is that a good thing? Yeah, that's and people are inclined to want to do that because they will probably the most surprised person in room to find out that that's successful but you need to think about how am I and think about it in a cold and sober way how will my life change or how should it change or how can I manage how it changes in a way that still feels good to me feels good to my spouse, to my family, to our lifestyle, to everything else and you can't not have that conversation. You can have it with yourself staring in the mirror but you better have.