Mark has been at the forefront of providing job stability and funding for his own employees and the networks that support them during the pandemic. He was the first NBA owner to take this action for vendors and other staff around the Mavericks, and his example soon led other owners to follow suit. In his view, "It's never selfish to keep your company in business. It's never selfish to hire. It's never selfish to try to do the right thing for your employees, your customers, and your stakeholders."
He believes strongly in the long-term value of taking care of people. "Consumers, particularly Gen Z and millennials, are becoming more used to looking for a social component from the companies that they do business with. Now going forward, those same people are going to look to see how you treated your employees. They're going to look to see how you treated your customers. They're going to look to see what impact you had in your community."
Going forward, he believes there will be "great companies that come out of this....that were born in this mess." The key is to think about what that future looks like and how to contribute to making it better than the world that brought us into the pandemic. As Mark says, "Where can you see yourself? Put your long-term vision hat on and try to maximize the impact that you can have."
You can listen to our conversation on Apple Podcasts, Google podcasts, or wherever else you like to download podcasts.
Many of you who read my podcast launch post requested full transcripts as well. You can find my conversation with Mark in that format below.
Highlights from the show:
- Mark gives a brief summary of his career and work. (1:44)
- We discuss running the Mavs, a completely shuttered organization that can't pivot the way a small business could, and what the team is doing to connect with fans (3:28)
- Mark's work and family life during the pandemic. (5:37)
- Discussion of the many functions schools fill in communities, how to help them now, and find resources (schoolclosures.org) (6:40)
- Mark talks about how his kids are experiencing the pandemic and the messages he's trying to impart to them about how there have always been moments in history when you wake up to a different world. (7:40)
- Mark's efforts as a business leader and what he's been doing starting with continuing to pay employees in his companies. (10:07)
- Mark's ESPN interview during the final NBA game of the season where he was first owner to call for paying everyone in the team's the network and how crisis brings out people's true colors. (11:59)
- Giving people trust and autonomy and opening lines of communication as a leader, and how Mark's leadership has evolved. (14:16)
- The lifecycle of companies and the importance of creating a bottom up culture. (15:30)
- Companies that have made smart decisions as the pandemic has unfolded. (16:25)
- Be aware of what's happening in the marketing of your products, learn everything you can about what's going on in your industry to set your company up for the future. (18:56)
- What Mark has been doing to encourage companies to invest in themselves now and be courageous in moving forward, including applying to the PPP. (20:07)
- The value and importance of offering people stable employment and how keeping your company running isn't selfish, but a service in rough times. (22:13)
- The way companies treat employees and customers and impact their communities now will them for decades to come. The trend was already happening, now it's accelerated. (23:45)
- Mark talks about his covid relief efforts, and we discuss the PPE crisis, how it became a black market situation and the need for open data and coordination to help put it right. (26:48)
- Questions he's getting from companies as they grapple with the crisis and how his experiences with rough times have effected his answers. Need to communicate with vendors and be transparent and proactive. during S&L crisis. (36:43)
- The two types of employees: those who create stress and those who eliminate it. The Dunning-Kreuger effect in action. (44:48)
- Don't sit on the sidelines. You don't have to go big, just connect. Create local network effects and then go from there. Everybody can be a leader in their own community. (47:20)
- Mark's predictions for how business and society are going to change, the products we'll need and the opportunities that will come out of those needs. (48:11)
Show-related links:
- Dallas Mavericks
- Shark Tank
- schoolclosures.org
- The Diary of Anne Frank
- Mark's ESPN interview after the NBA's announcement it would suspend the season
- Monkey Mat
- Dude Wipes
- Paycheck Protection Program
- Project N95
- PPE Coalition
- Rise Nation
- Dunning-Kreuger Effect
- "Want Your Business to Survive? Make Employees Owners"
- "AI, robotics & precision medicine to drive biz post-Coivd: Mark Cuban"
- "Mark Cuban says bailed out companies should never be allowed to by back their stocks ever again"
- "Billionaire Mark Cuban Has Ideas on What the Government Could Be Doing Far Better"
- Mark Cuban's website: https://markcubancompanies.com/
- Mark on Twitter: @mcuban
- Eric on Twitter: @ericries
Transcript: Out of the Crisis #2, Mark Cuban
Eric Ries: I'm Eric Ries. This is Out of the Crisis. There's nothing good about this situation, but I have been witness to extraordinary acts of generosity, of courage, of ordinary people stepping up and leading, even in situations and places where they couldn't have possibly imagined them doing that even just a few weeks ago. I've always heard stories about how people did that in past crises. My grandparents used to tell me stories about that, and I never really imagined it happening to me. And yet I am witnessing it all around us, and I do think that is a path forward for us as a society, for us to realize we have these inner strengths and capabilities to step up and lead.
Mark Cuban is a legend. You've probably seen him on TV, or you know him as the owner of the Dallas Mavericks, or just a larger-than-life personality in our society. Mark and I have been on many related email threads in this covid crisis trying to work on relief efforts. He called me the other day and just asked me for a comprehensive briefing on everything related to the procurement of personal protective equipment for our medical first responders.
Mark has a unique ability to use his name and his platform to open doors. He, of course, can do that for himself but he's been very generous in this crisis doing it for others. Here's my conversation with Mark Cuban.
Eric Ries: I can't imagine there's anyone out there who doesn't know you and the many things that you're involved in. But just for those maybe who are new, you want to introduce yourself and tell us a little about the many, many different business ventures you're involved in.
Mark Cuban: Yeah, I guess. I'm Mark Cuban. I own the Dallas Mavericks. I'm on Shark Tank. I've invested in hundreds of companies. I made my money initially when I was in my 20s. I got fired from a software sales job, started a systems integrator called MicroSolutions. We were one of the very first local area network and wide area network integrators. I taught myself to code over seven years and wrote all kinds of applications. We wrote the very first automated purchase order interface for Walmart. For Zales we wrote one of the very first video interfaces so that Zales could take videos and pictures of their inventory instead of having to keep one in a safe. Just all kinds of crazy applications, and sold that to a company called CompuServe, if you remember back then.
ER: Oh, yes.
MC: Then took a couple of years off. In the mid-90s, late '94, early '95 my buddy and I were trying to figure out the best way to listen to Indiana basketball and we had to have a speakerphone where we had one set up in Bloomington, Indiana, one in Dallas, Texas. Someone would put a radio next to it in Bloomington and we were like, "This internet thing has got to have a better way." So we started out what turned out to be one of the first, if not the first, audio streaming companies called AudioNet. Obviously we evolved to video as well, and took that public, and then sold it to Yahoo almost 20 years ago today. Then after that, bought the Mavs and just been having fun investing and starting and running small companies ever since.
ER: That's awesome. Obviously not going to have time for any basketball questions but just how is the whole organization? I was just thinking about what it must be like to run an organization that is completely shuttered, that can't do its business at all.
MC: Yeah, it's no fun.
ER: What is that like for everybody?
MC: Yeah, it's no fun obviously. I mean from the Mavs perspective, the players are going nuts and you try to keep in touch with them all the time. Particularly with young employees you've got to really be vigilant because their natural instinct is to think they're invincible. They want to go outside and do anything and hang out. We'd have some young folks, guys in their 20s, and a woman in her 20s, actually get sick as well. She works on the advance systems. They'll be okay but it wasn't any fun. That kind of sent the message back to them that they really have to take this seriously. So that's been the hardest part in terms of the Mavs.
MC: Obviously a lot of it is out of our control. Most small businesses you can try different things and take advantage of different opportunities you create for yourself even in weird times like this. But with the NBA teams we've got to wait and take direction from the NBA. So that's a big difference.
ER: Have your guys thought about how they can use their celebrity and platforms to be advocates for social distancing?
MC: Of course. They're playing video games with kids. They're out there sending the message to stay at home, giving examples of how you can stay active in your backyard or indoors, and just trying to stay engaged. We live in a social media universe now and all of them, particularly in the NBA, have very large platforms. They want to keep those active and they recognize that, with kids not at school, kids are more active on those platforms and they're potential fans, that turn into followers, that turn into bigger fans, and that leads to better business. So they recognize that as bad as this is it's an opportunity to connect more with fans and really advance that connection with them.
ER: So great. I really appreciate you taking time to talk about this with so much going on. First on all just on the pandemic, it's affecting all of us. We're all dealing with it as best we can. How are you holding up? What's your pandemic set up?
MC: I mean I work from home all the time anyway so it's not a big change. You know me from the past. I'm not a big meetings or phone calls guy. I do 90% of my stuff via email. So this is kind of par for the course for me. It's more of an adjustment for others that I work with or work around who always wanted to do phone calls or meetings. But they were always used to working with me this way, so my life hasn't changed all that much other than my kids being home and a lot more forced family fun for the Cuban family.
ER: How are they holding up with school closed and everything?
MC: Yeah. The school is actually keeping them busy in the mornings. My 16 year old daughter still doesn't talk to me. My 13 year old daughter talks to me sometimes. So it's business as usual here.
ER: Yeah. That's really great. We also were accustomed to working and schooling from home so it hasn't been such a big disruption. We'll put a link in the show description, but we've been working on this thing called schoolclosures.org for families for whom this is much more of a crisis, and trying to help them get the resources. I'm astonished how much people use schools for. For school lunches and food security, and so many surfaces. So getting the work out to people who don't have as much as we do.
MC: There's a lot you can do. We're getting kids meals and just trying to help where we can.
ER: That is really awesome. Have you had any conflict in the family about what level of quarantine you've got to do for, like, packages coming in, or groceries, or anything?
MC: Oh, yeah. At the beginning particularly. You know, "My friends are doing this, my friends are doing that." "No, you're not doing it." "But ..." "No," and fighting that battle. "No, you can't even take your car." She just learned to drive. But she's smart. She's come around and she recognizes the risks and she understands what's going on. Yeah, it hasn't been a problem the last 10 days or so, but early on it was. I think they're smart enough to recognize this is something that’s unique, because they see the fear in their parents' faces. They hear the fear in their friends' parents voices. It just is what it is. And the good news is they're social media babies, right? That's how they grew up. So whether it's Snapchat, whether it's Instagram, whether now it's TikTok, they've got things to occupy them. I couldn't even imagine when I was growing up if this would have happened. No sports on TV? I don't know what I'd do.
ER: Inconceivable, right? It's such a huge difference. People obviously compare to the 1918 pandemic a lot. Think about how much social activity, but also how much business activity, is able to keep going because we all can do so much from home. And everybody is discovering more they can do.
MC: We tried to explain to them that throughout history that there's always been circumstances where you wake up one morning and the world is different. Wars have been fought. My grandparents were forced from Russia. It's either leave or die. My dad and my uncles fought in the World Wars. So there's always circumstances in people's lives. I mean you hope you don't have to deal with it, but I mean if you live in Syria. There's just no normal there. So we have first world problems. This is still difficult for us, but it's still a first world problem compared to what people in undeveloped nations are facing.
ER: Yeah. Amen to that.
MC: We try to drive home to them and amplify as much as we can that as difficult as this is, people are resilient. In other countries they're gone through worse and in this country we've gone through worse.
ER: I took a lot of comfort in that. I remember as a kid, my parents were victims of the Holocaust and fought in the wars. They would tell us the craziest stories about what it was like. As a kid growing up in America in a middle class family it just seemed so remote. Like, "Oh, come on. That's so old fashioned." That kind of stuff can never happen here. And now I wish I'd listened a little better.
MC: Yeah. We reviewed the story of The Diary of Anne Frank and what she went through. Obviously it didn't end well, but still it was a book they had read and it resonated with them.
ER: It has a whole different meaning now when you're actually living through this.
MC: Yep.
ER: One of the themes that has really struck me the last couple of weeks working with you and so many others is this unbelievable surge of business leaders, civic leaders of all stripes kind of stepping up and trying to lead us out of this crisis. So talk a little bit about what you've seen and why you felt called to take on a leadership role.
MC: I mean I'm very fortunate. I'm not facing the financial struggles that I once did, so I'm in a position where I can try to help others. It didn't start with this, but when this happened--I have a platform. I have resources. I have people available to me to help me. It was just the right thing to do to try to help where I could. That started with continuing to pay employees in the companies I control ... Because I understood the grief and the uncertainty and the fear that they would go through if they weren't getting a paycheck ... and encouraging others to do the same.
I’m trying to use the Mavericks as a platform to reach out through our foundation, and through the Mavs directly, to get food or daycare to first responders. You know, it's just the type of thing that makes common sense if you have the resources to do them. It's not surprising to me at all, whether it's yourself or others--so many other people have recognized that, "Okay. I've got the resources to help solve problems, and there are people out there that they're putting their lives on the line to save people, why wouldn't I help them?" Do you know what I mean?
ER: Yeah, and they're the real heroes.
MC: Yeah, they are the real heroes. We've done it with the military. We'll do it with first line responders in healthcare. God forbid it happens again, but we'll do it again if we have to.
ER: I really remember right the first day the NBA decided to shut down. You were I think the first owner to call for providing funding, not just to the direct employees but to everyone in the network of vendors and people who were around the team who had economic need. It was really interesting. One thing I really believe is that a crisis reveals your true colors. You learn a lot about companies and organizations by how they respond in the moment. Look, I'm a Warriors fan. Their first day of reaction to that was not very strong. After you said that's what you were going to do, then other owners kind of stepped up and said, "Yeah, we're going to do that too." I just thought that was a really interesting moment in showing how an individual act of leadership could then influence a whole industry.
MC: Yeah, I mean it just happened that it was a Mavs game when everything shut down. It was just happenstance, but it was something I had thought about previously. We'd had conversations, not knowing that that game was going to be played that night. Not knowing what would happen with the rest of the season. It was just something that was a concern to me and it just came to mind when I was doing the interview on ESPN. Fortunately it did lead to others doing it. Again, I still think most would have done it anyways if they could afford it, but it was just nice to see people recognize that this was something they should consider.
ER: One of the key values here is to put people first, and that businesses, organizations, we exist to serve human beings. So when people are in need that's got to come first as a business priority. That just seemed like a moment to communicate that value through action rather than words. What else have you seen or done to try to help your organization to understand the need to put people first?
MC: I mean that's just a driving principle of who we are. Look, I've made lots of mistakes and I'm not here to tell you that these all came organically to me. We've had problems at the Mavs that I had to respond to and I had to learn from. When you have things that go really wrong you have to learn a lot and you have to recognize where things did go wrong. I recognized that the leadership that reports to me is just as important as what I do, and I gave people a lot more autonomy. You know, responsibility without authority doesn't get anybody very far. I think one of the things that I've recognized is that I've got to pull back and let people have that authority so that they can make the decisions, and just be more available to them.
I think that's really a big part of how my leadership has evolved. Because I was just having fun for a long time and it kind of bit me because I trusted people without communicating with them. Now I trust them. I give them authority but I communicate a whole lot more, actually let them communicate with me a whole lot more, so that we're all on the same page. When you do that, that kind of sets an example, and the people that report to me do the same thing. The people that report to them do the same thing. Even though we're not a very hierarchical organization, the level that we do have we really try to make it so that when you have responsibility you have authority, and a big part of that is communicating with your people.
ER: Yeah. One of my pet peeves is an org chart that puts the leader at the top of that chart. It's like no, because that's completely backwards. The leader should be supporting the people who do the actual work.
MC: Exactly.
ER: They're like the roots, and into the muck, you know?
MC: Yeah. And every company has different parts, has its own life cycle, right? You have to recognize and be self-aware where you are in the life cycle of the company. When you guys were starting up, when I was starting up, it was go, go, go, go, go, and when am I going to get my next customer? How am I going to pay my bills? Will I be in business in another month? You deal with things a lot differently then.
MC: As you grow and become more established, you have to recognize the business is an organism of its own and takes a life and culture of its own. You have to work on getting that culture to the point where it really is bottom up. Where the people who are touching the customers the most are the ones that recognize that they have the most important job, because if they don't do their job well we're not going to have customers and things aren't going to work.
ER: Totally. So beyond basketball, and your platform, and advocating for what is right, can you share some stories about people that you've seen step up that have impressed you?
MC: I had another company, Monkey Mat, that's a Shark Tank company that made the decision to close down. I thought that was tough but it was also brilliant because they had money in the bank. They didn't just let it go and take it the very end and then hope they could make it work. They were like, "We don't see the light at the end of the tunnel." They had just been abused by the tariffs. That was an issue. Their customer base was starting to not be as direct as it had been, and they recognized that, "Hey, this is a problem, and we're going to return money to our shareholders." But it also allowed them to put money in their pocket and their employees' pocket rather than just riding it out to the end. I was impressed there.
I've seen Dude Wipes is a company that really amped up. There are a few companies that are doing better because of what's going on. They recognized that they're an alternative to toilet paper. They're a sanitizing ... I don't even know what you call it ... Wipe. They're sanitizing wipes, right? So they ramped up.
ER: Business is booming.
MC: The business is crushing it, yeah. I've got a few Shark Tank companies that are crushing it. They have the moral dilemma of, "Okay, I feel bad about this." I said, "Don't feel bad. People like your product." They said, "What shall we do? Shall we amp up advertising?" I'm like, "Yes." I mean people out there don't realize the cost per click for advertising is going down. The customer acquisition costs are going down. If you play this right and you connect more closely to your customers, the lifetime value may go up.
For Dude Wipes it was an opportunity to connect more and reach out and get more customers, and they took advantage of it. They asked me, "What else can we do?" I said, "Hire people. There's going to be a lot of people who need jobs. Pay them 15 bucks an hour at least. They've got to be able to live off of it. Hire them to do whatever you can find them to do."
I think that's just one of the things where every company when all of a sudden your business accelerates, there's always something you need done. Now you can find a lot of smart people to do it because so many people have lost their jobs. So those are a few examples, but I think the one thing to really point out is whether you're struggling or doing well you have to be aware of what's happening in the marketing of your products.
Things are changing in digital marketing, changing dramatically. The big advertisers are pulling way back. If you can reduce your cost per customer acquisition, if you can connect in a way that expands your email database, adds more customers and allows you to connect in new ways, that's setting a platform for the future for you. So even in these dark days you have to be opportunistic.
That also includes really learning everything you can about what's going on in your industry. You can't fall back. You really have to lean in and say, "Okay. Are there opportunities right now for me to take advantage of? And what do I need to do to do so?"
ER: One of the things that Sam Altman said struck me was that during a boom the only thing that gets cheaper is cost of capital, everything else gets more expensive. So conversely in a crisis, the really key inputs that allow companies to grow get cheaper. Human talent, marketing, engineering, R&D. Everything gets less expensive. So what have you been doing to encourage companies not to be afraid now? To invest, to put people to work? To make sure that we're all doing our part, that this doesn't turn into an economic depression?
MC: The first thing is to take advantage of the Payroll Protection Program. Now you can't apply until Friday. I'm kind of disappointed on that, but that's neither here nor there. But for those who aren't aware, it's a government stimulus program that effectively says for your employees that make under $100,000 a year, the government will cover your payroll expenses, and rent, and utilities, and some ancillary expenses, for the next two and a half, three months.
But, there's also a kick, if you retain all your employees, you don't have to pay it back. So I've been pushing all of my Shark Tank companies, all of my smaller companies. You have to have fewer than 500 employees. So all the companies that qualify, to go out and apply for this because it allows them to retain their employees. Allows them to continue to push their business forward and stay in business and potentially grow. That's just something every small business with under 500 employees needs to take advantage of.
ER: A lot of folks I've been talking to about this, they're not accustomed to asking the government to help and it feels a little weird. Start-ups don't always interact with the government. Have you helped people understand why it's important for them to do this?
MC: Yeah, of course. I run Libertarian, just it's who I am, and my first inclination was, "I don't think I want to do this." But this is not a standard operating procedure. This is not a typical environment. This is a black swan event and you have to deal with what's in front of you. The government knows that stimulus is important for the economy. Like you said, we don't want any more severe recession than we're already in and hopefully to avoid a depression. So we really need to take the steps to keep our employees, keep them employed and keep them working. If there's a stimulus program that allows us to do this, you've got to do it.
ER: I don't think I was really conscious of this pre-crisis, but it really struck me in the early days because I was so focused on taking care, obviously, of our employees, our vendors, our contractors, our broader community, was that one of the ways that you provide support to people is to offer the stable employment.
MC: Yes. Oh, no question.
ER: Yeah. Actually keeping the company in business, having it have a sustainable business model, having it pull in the funds that it needs to keep going, that's actually not a greedy thing to do. It's a way to be of service to the people that are in your ecosystem.
MC: Without question. As someone who's been fired and had their back against the wall and sleeping on the floor and not being sure where my next dollar was coming from to pay for food, I can connect with people who are in that circumstance or would be in that circumstance if you had to lay people off. So anything you can do to keep them hired, you just improved their sanity. You improved their mental health. You improved the lives of their family. So you're certainly not being selfish.
Look, I'm a capitalist. It's never selfish to keep your company in business. It's never selfish to hire. It's never selfish to try to do the right thing for your employees, your customers, and your stakeholders. Where it becomes selfish is when you just try to squeeze out one extra dollar at the expense of an employee, at the expense of a stakeholder to try to look good to shareholders because you don't think they trust you or believe in you enough to increase your price earnings ratio if you’re a public stock. That's where things go wrong.
ER: And the way you treat people in a crisis when you could take advantage of them, people remember that forever.
MC: Right now, that way you treat your employees today while all this is going on will define you as a brand for years if not decades. Shark Tank is an example. We are seeing more and more companies over the last three years that have a social component to them. Buy a pair of socks, we'll give away a pair of socks. Buy these sandals and we'll contribute money to building schools in Afghanistan for girls who otherwise couldn't go to school. Buy this and we'll provide blankets.
So consumers, particularly Gen Z and millennials, they're used to, or becoming more used to, looking for a social component from the companies that they do business with. If you don't have it before this, you're at a disadvantage. Now going forward those same people, they're going to look to see how you treated your employees. They're going to look to see how you treated your customers. They're going to look to see what impact you had in your community. Because when they go on Instagram, or on TikTok, or on Snapchat, or even Facebook if they have it, they're not going to wear your tee shirt. They're not going to be proud of showing your products online.
They're not going to be an influencer for you organically and authentically because they don't want to be associated with your product. And they're going to tell their friends the exact same thing. We're always seeing posts that, this company just sent an email to layoff their employees, I'm not doing business with them again. That company did a group voicemail to everybody in order to furlough employees. That's going to have ramifications for years. So what you do today will help define your brand or hurt your brand for a long, long time.
ER: One of the famous things that Toyota would do, and Toyota has been around since the Great Depression and before, was that during economic downturns they would keep people employed in the factory even if they had no orders, and just come up with something else for them to do. Make them make improvements in the factory, improve capacity, so that when the orders eventually, they're going to resume, they're poised to take advantage of the growth. So anyone in your portfolio, or anyone that you've been talking to have an example of something like that, or impressed you with something?
MC: A lot of our companies are keeping people employed, there's no question. But in all small businesses, you're so go, go, go, go, go all the time. You always find yourself thinking, "You know, if I only had a few minutes, if I only had a day or two, I really would love to do A, B, and C." I'd like to redo my marketing materials. I'd like to rewrite this manual. I'd like to reevaluate this code and look for bugs and clean it up. I'd like to talk to this customer. I'd like to redo my video content, or add or create new content, or write scripts for this content.
All these things that you always wanted to do if you only had time, now you probably have the time. Now is the time to do those things so that you come on the other side after the reset, in America 2.0, and you're stronger.
ER: Let me ask you a little bit about the covid relief efforts that you've been involved in.
MC: Most of the philanthropic stuff has been geared towards trying to help first responders. Getting them fed. Taking care of their daycare needs. Getting food to kids at school. Getting money to food banks. Just trying to get where there's immediate need as much as we possibly can.
I haven't been one to try to say, "Okay. I'm donating X amount of dollars to try to find a cure or a vaccine for covid-19," because that's just longer term. I've really tried to focus on ways that we can help people that are facing immediate needs, whether it's feeding them, clothing them, sheltering them, providing daycare, whatever it may be.
Then obviously as a business person that just looked at what's happening with PPE, particularly the masks. Obviously that went from an efficient market to an inefficient market overnight. And it upset me. I mean I thought that there were companies out there that were manufacturers, particularly domestic manufacturers, that were withholding data and keeping the market opaque. And that was contributing to it becoming a black market as opposed to even a remotely efficient market if not a truly efficient market.
So that's where I got involved with you guys and Alex and a bunch of other folks for a project, N95.com, which effectively looks to connect buyers and sellers and make sure that product that was going from point A to point B was actually authentic and could do the job. The information they've uncovered, the opportunity they've been able to find, but also the junk, and the garbage, and the scams they've been able to protect people from is incredible.
ER: That's sickening. That's awful. We'll put a link in the description to PPE Coalition for those that want to get the latest information and want to get involved there. Why that issue in particular? For me, it makes my blood boil.
MC: Because it's something that shouldn't have happened, right? I'm sorry if I'm a step slow. I haven't slept in like two days.
ER: No, it's fine. Listen, this is one of the most outrageous things that's happening in the crisis right now. I think it's something people need to be aware of.
MC: Yeah, it's crazy. I'll use 3M as an example. I don't think that they're doing anything illegal but I do think that they don't have a great corporate conscience. There's a product manager at 3M that knows the N95 mask business inside and out, domestically and globally. They know who all the manufacturers are. They know what their capacity is even with all the additional capacity. They know historically who the buyers are. They know the trends. They've been in business and doing this long enough. They were there through SARS. They were there through other flu epidemics. Not as bad as this but they saw trends, and they had an understanding. They also had allocation programs that allowed them to deal with hotspots.
Yet, having all that data, they shared none. And because they shared no information, that market went from inefficient to their distributors telling people placing orders, as of this morning when I talked to some order placers, some hospitals. They're telling them, "You can place an order. You cannot cancel it. We don't know when we'll have any product to ship you, and we'll just ship it if and when we get it." And when you respond to your customers like that, it freaks them out.
So they assume that's just the way the entire market is and that's what it's become when the leader does that. So they're out there buying whatever they can in masks, from whoever they can, at whatever price they can source it at. And not only are they doing that, they're hoarding it. Whenever they can get extra, they're not sharing it, they're keeping it to themselves because of all the uncertainty. They don't know what their apex is going to be. In some cases they don't know when it's going to be. In some cases they don't know when it's going to strike them because they're in an area that hasn't been hit hard yet.
Because of that the market goes from an efficient market to a gray market to a black market. That may not have been able to be completely avoided, but it certainly could have been dealt with in a way that made it a lot less traumatic, and a lot less intense. And 3M could have done that just by releasing information. If they would have just had their head of supply chain, their product manager for the N95s, just go out there and talk to everybody, to share data with other manufacturers. To talk to other manufacturers and say, "Why don't we organize together and release information about what our daily production is, what our daily deliveries are, what our order rates are, so we reflect demand. And work with the hospitals that are our customers and ask them what their daily burn rate is so other hospitals know how many are being used, so they can learn from hospitals who are being hit first."
All these types of things that they had information that would be supportive and helpful, and they didn't share any of it. To me, that's just the wrong way to approach things.
ER: Yeah. I've been on the phone non-stop the last 10 days with people all over this ecosystem, industry, and all these grassroots groups. One of the themes that has come up over and over again is lack of coordination, lack of cooperation, lack of data. We're all bidding against each other on the same black market, bidding up the price. And there needs to be a coordinated national response. We've got to work together. We've got to have open data. This is a crisis that's about to get much, much worse. All of us are getting these awful messages on social media, by email. Who doesn't have a family member or friend who works at a hospital or in the healthcare system in some say. Everyone's got these messages.
MC: That's exactly right, and it's reflective from our government. I'm not trying to pick on anybody, but it shows you that you can't have everybody in charge. When you have everybody in charge of trying to solve a problem nobody's in charge, and everybody steps on each other. And now you're also seeing in articles that USAID which had a stockpile actually shipped a lot of this PPE overseas. This week. You know? And if you had one person in charge you could manage everybody that's working with them, then you could start to take inventory of everything. As opposed to everybody just scrambling trying to solve the problem, not talking to anybody else.
ER: So one thing I want to get your perspective on is a number of the people I've been talking to who are working relief efforts, and some of these people have been working 24 hours a day for weeks now, they have these moments where they're like, "Why me? Why am I in charge of this? This doesn't make sense." We had that conversation today. What do you and I know about this? Why are we called to do this?
MC: Yeah. Why do we find ourselves adding value to this problem when there's no reason we should be adding value at all, or even involved.
ER: Yeah, and if you go on social media there's people saying, "Stay in your lane. What are you doing? Leave this to the experts. Leave it to the government." I was just counseling someone last night who wants to start one of these projects and they were afraid. They said, "Wait a minute." They actually had it done and were not able to ship it. They couldn't bring themselves to publish it because they were like, "I'm going to get crucified on social media. People are going to yell at me. I might make a mistake. Who am I to say what needs to be done?" It was late at night. I said, "Listen, we've got to have a heart to heart right now. First of all, you're talking to the minimum viable product guy. So what am I going to tell you, delay? No, of course no. But also, you have to do this. You were called to do it. The cavalry is not coming."
MC: Yeah, the only caveat that I would put there and Eric, tell me what you think. A lot of times people have the best intentions. They have an idea, or they want to start a foundation, or they want to do philanthropy, but what they don't do is check to see who else is doing the exact same thing.
ER: Exactly.
MC: Right? So I'm a big believer, and this is generically, it's not specific to all this, that we have too many charities. That there should be a great charity consolidation because there's so much duplication of effort, so much duplication of fundraising, so much duplication of overhead, that the effectiveness of all the above is diminished because these charities are competing with each other.
ER: I've talked to so many people these past couple of weeks who want to be in charge. That ego is getting in the way of doing the work, so we have a lot of redundancy and lack of cooperation. So it's how do you find that balance between, you have your own unique distinct perspective, but then the need for us to work together and not make duplicative effort.
MC: Yeah. It's almost like starting a company or creating a product, right? You really have to do your homework to do it right. Now you may have a vision that allows you to do it better, but we talk all the time, "Is it a product or a feature?" You have to really know the difference because somebody else's product, the difference between your product and theirs may be just a feature they can add in 10 minutes. So even if you have a unique element to your idea for solving the problem, you also have to ask yourself, can you take this to somebody already doing this and make their lives, or make their product, or make their service better.
We're starting to see some of that now as people realizing they're duplicating efforts. But I think it's incumbent upon anybody, in any company you start, whether it's a charity, nonprofit, or for-profit, can you work with somebody already in place to get this done? Because duplication of effort is counterproductive.
ER: Please cooperate. Please share data.
MC: Yes.
ER: The days of delay that this pissing contest causes, people are dying every day now, so there's not really the time and energy for duplicative stuff. Hey, maybe that should be true all the time to your point, but especially in a crisis, right?
MC: Especially now, yeah. Especially now.
ER: Can you talk a little bit about the kinds of questions you're getting from your portfolio companies, and the companies and nonprofits that you're affiliated with? What's some of the questions you're getting as they're grappling with this crisis?
MC: I mean the first is, "Have you seen anything like this before?" No. The second is, "What should I do about production?" I have one company, Rise Nation, which is a boutique exercise company, and they were in the middle of building another location. On one hand, I want them to continue to build it, because I want people to have jobs and continue working and us paying them. And on the other hand, they're going to finish it so quickly now because those folks have nothing else to do, that it's not going to open for months because there's not going to be anybody who can go to it.
That creates its own set of challenges. So trying to deal with what's truly a critical path and prioritizing in that particular case, and really across the board, have probably been the biggest questions, "What do I prioritize and how?" That's where I've had people put together critical paths of, "Okay. What do you need to do, and who all is impacted along each step of the way?" Then trying to maximize the impact that you can have for the long term.
Then the second thing that I've tried to convey is it's painful for today but there's going to be great companies that come out of this. We're going to look back in five, 10 years, and there'll be five, 10, 20, 25, however many companies that were born in this mess that we consider to be great companies. So if you put your long-term vision hat on, where can you see yourself, and what's your vision for the other side? This isn't business as usual, so do you have ... This is a conversation I had yesterday. Do you have a vision for the other side that maybe is different than what you're doing today, but maybe is something that everybody can get behind?
Because who knows where those visions are going to come from, right? Maybe it's you. Maybe it's me. Maybe it's this entrepreneur. Maybe it's any of the hundreds of entrepreneurs I may work with. But it's going to come from somebody so press yourself. Visualize what you think it'll look like when we come out of this. And can you do something to change the game that'll make it better?
ER: So when people call you and ask about what you've seen before, I expect what they're expecting you to say is well, you've lived through it. You've been through some shit, man. Excuse my language. You've been through the dot.com crash. You've been through the Great Recession. Tell me what you think are lessons that you've learned from those experiences that are relevant.
MC: I'll tell you, nothing matches those experiences. But I'll give you an example, the one that I've been using with everybody. So my first company MicroSolutions, the systems integrator. We were about two years old. We had three employees. We were doing things we thought the exact right way. We would have our accounts payable list. I would review that and then somebody else would cut the checks. Then I would sign the checks. Then I would have somebody put the checks in the envelopes and mail them to our vendors. No big deal. Worked for almost two years.
One day I get a call from the bank, a guy with a Texas drawl, "Son, you've had somebody come through the drive-through and they whited out the payees and put their name when they wrote it over." I'm like, "Tell me you didn't cash it." "Well, of course I cashed it. Why wouldn't I?" So it turns out of the $84,000 we had in the bank, $82,000 was for payables to our vendors. She took it all. Gone. So my first response, obviously, was, "What the fuck?" My second response was, "Okay. I've got to get to work."
My partner, Martin, and I did just that. We got on the phone with our vendors. We explained what was going on. They knew we were growing. I mean we weren't insanely profitable but we were sustaining ourselves and growing some. We were a decent customer for them, and they understood. But they listened and they talked. And the message I gave to my companies where I've used this example then and now, is you've got to communicate with your vendors exactly what's going on. You have to be honest. You have to be transparent, and you have to be proactive. You can't just put your head under the pillow and hope they don't call.
When I went through it, actually, back then we were in a recession and things weren't great for most companies. So they had heard it from others but for different reasons, right? Companies were going out of business. This was right around the S&L crisis. But we talked to them and found a way through it, and they listened because they don't want to see their customers going out of business.
Today, your vendors are feeling the same fear that you're feeling. They're having the same problem with their manufacturers or vendors or whatever the case may be. And they'll talk to you and they'll listen. They recognize that these are unique circumstances. If you can convey to them here's how you're going to get to the other side, here's how you'll come out of this better if they work with you and give you a payment schedule or whatever it may be, most likely they're going to listen. But as an entrepreneur you have to do that now. You can't wait till it hits the fan. You have to be proactive, transparent, and honest.
ER: One of the things I've been urging people to do is to send a letter to everyone of their vendors and contractors urging them to put their people first and making sure they understand, "Hey, we don't want you to put your people at risk for our sake. We want you to obey social distancing, too." Have you done something like that with your network of suppliers?
MC: I haven't talked to them. I mean we've talked to them on the phone, haven't sent letters or anything like that.
ER: A little old-fashioned, I guess, to send a letter.
MC: Yeah, that is old-fashioned for me. But I have had the conversation with some creative folks where, "Look, you shouldn't be spending this much time. You need to spend less time working on this." I know you're stressed because you're concerned about how much business you're going to continue to get, and I know you're trying to kiss my ass because you know I'll keep on giving you business, but don't worry, I'll be here. You go take care of your family first because your kids are at home. You can't be stressed. You're not going to do as good a job and you'll kiss my ass even better, I'll get both cheeks, when we get on the other side if we do this right.
ER: You got me stumped there for a follow-up. That's exactly right. I guess the point is you take care of your vendors as human beings first. Then when it comes time to renegotiate, when it comes time to work out payment plans and figure out how to get through this together, they're going to be more willing to work with you.
MC: Of course. Employers are scared. I had a conversation with somebody I didn't even know actually. They emailed me. They were like, "Well, my employer didn't tell me this, this, this and this. And I'm upset about it." I'm like, "You don't think they're upset? You don't think they're terrified? You don't think they're worried about whether or not they'll stay in business? You need to talk either to your direct manager, or it's a small enough company, the owner of the company and just tell them that you understand."
Because it's not just entrepreneur or employer talking to employee. If you're an employee, you should be just as motivated and proactive to say, "You know what? What can I do to help you stay in business? Where can I help so we get through this together?" Because that's going to create a much stronger bond between you and your employer that's going to pay off for a long, long time.
One of the sayings that I like to use, or concept that I like to convey, is that there's two types of employees. Those who create stress, and those who eliminate stress.
ER: Oh, amen to that.
MC: You're always going to be proactive to keep the people that eliminate your stress, or at least reduce it. You're going to just let the people who are the hurricanes ... You know, it's always the people who think they're the most valuable who always are the least valuable because they create hurricanes of their own making. Then they say they're the only ones that can solve them. The people that just go about their jobs reducing or eliminating your stress, the minute you hear they're even looking for a job or considering leaving, you go nuts and proactively give them a raise.
So in these types of circumstances, you want to be the employee that proactively goes to your boss, or the owner, and says, "How can I help? Here's what I can do. My partner, my spouse works, it's not a stress for me. Or my partner, my spouse doesn't work and this is going to be a problem but here's how I can put myself in a position to help you succeed here. Let me do this, this, this, I'm really good at this, this and this. You tell me what works best for you." And when you have that level of communication, regardless of who starts it, that's how you get to the other side and come out stronger.
ER: We'll definitely put a link to the Dunning-Kruger effect in the notes for the thing about people who think they're the most valuable. So, most importantly Mark, where do you think we go from here? How do we get out of the crisis?
MC: I don't know. I honestly don't know. But I think what I do know is that there's no other country in the world that's as resilient, that's as entrepreneurial, that's as creative. I have complete faith in American exceptionalism, if we want to call it that. That we're going to come up with unique ideas and create unique opportunities that we'll only see because we've gone through this. That whatever is on the other side after this reset, whatever occurs, that I have complete faith we'll figure it out and we'll come up with new businesses that propel us.
I mean when you go back over the last 50 years and you look at the greatest technological achievements, most of them came from this country. Now a lot of them were immigrants who came here, but they came here because they recognized that we incubate businesses, right? This is a country that appreciates entrepreneurship. I think that will continue. Maybe we won't have as many immigrants but those who are here I think are going to contribute. And I think entrepreneurs are going to lead the way, and that's how we come out of it. But the specifics, I don't know.
ER: So there must be people listening to us right now that are sitting on the sideline. I mean how many of us are kind of in existential dread, despair, on social media feeling like there's nothing we can do. If someone is on the sidelines right now, can't figure out how to help or what to do, how can they get in this fight?
MC: Take care of your family. Take care of your friends. Take care of your community. Start there first. Call people on the phone. Call your friends. I had a hang out with my high school buddies, some of whom I hadn't talked to in a couple of years. It was great, and just ideas started flowing. Because you don't have to go big, you just have to connect. And when you connect with people you start getting that network effect.
I think that's what we really need people to do. Start working locally in your community. Create a local network effect and then go from there and see where that take you because everybody can be a leader in their own community. Everybody can be a leader in their household. Everybody can work with people they know. You just have to connect with them. You can't hibernate and keep to yourself.
ER: Give us one prediction for how the world, business world, our society at large is going to change as a result of the crisis.
MC: I think people are going to be a lot more cognizant of cleanliness. We'll see a lot more germaphobes, and that's a good thing. It's not a macro thing but it's an important thing because we're going to need to get past social distancing. We're going to need to be able to go into a communal environment, and good hygiene for products, for services, for ourselves is going to be critical. It seems so commonsense and so basic, but it's something that I've always taken for granted, haven't you?
ER: Oh, of course. And listen, epidemiologists have been warning us about this for years, that we've got to change our habits. And we've been 100% ignoring them because it's such a downer message. I don't think we're going to be ignoring them to the same extent anymore, right?
MC: That's exactly right. And that's going to create opportunities. You're going to see one man sanitizer, one woman sanitizer companies just displaying everything. I've had conversations with people at our arena about creating labeling systems because if my mom wants to go to the local park she's going to want to know when the last time that park bench was sanitized, and how many people have been there since then. And, knowing, okay, here's a little label, or whatever it is saying, "Okay, it's only been 30 minutes. Feel free. You're safe." Or, "The count of people who have been here is X." Those are the types of things where giving people comfort that they can venture back out and have some ability to return to normal. I think those types of opportunities are going to be big, but it's going to take some time.
ER: This has been Out of the Crisis. Out of the Crisis is hosted by me, Eric Ries, produced by LTSE's Ben Erlich, and edited by Breaker's Jacob Tender. Music composed and performed by Cody Martin. Out of the Crisis was created in partnership with Breaker, the best platform to create and listen to podcasts. For more information on ways you can help, visit helpwithcovid.com. I have several projects on there. Feel free to message me that way. I'm also Eric Ries on Twitter. If anyone has ideas or is working on a project related to solutions, please do reach out to me. Thanks for listening.
