Learning from Mistakes | Snap & Warner Music Chair, Fmr. Sony Pictures CEO

Pleasure to be here. Thank you for having me.

Maybe it's helpful to go back to sort of the origins of the book, how it came about, because it relates to my mistake as well. I've written this book with my partner Josh Steiner, and it was actually his idea. Josh and I went for a walk one day and Josh turned to me—this was about five years ago, five years after the hack, which happened 10 years ago. He was very involved and helped me during the hack, and he said, "Look Michael, I know you feel you've made a big mistake in that moment, and you've always tried to avoid talking about it with me. I too have a big mistake I've made." He had a separate mistake when he was in government earlier on. And he said to me, "I think it's unhealthy that the two of us are keeping this bottled up inside. We should explore what those mistakes are and try and understand how we can resolve them a little bit." In the course of that, we started to explore a process that we engaged with in terms of understanding how mistakes come about and how mistakes should be dealt with once they've happened. That process involved recruiting a professor from Johns Hopkins whose name is Alison Papadakis, who's a professor of psychology. The three of us first established the process, and then we set about both interviewing ourselves as well as interviewing other people who had made mistakes—some of them famous and some of them not. So what did we discover? We discovered that most mistakes happen in three acts. There's the thing that comes before the mistake: what was the impetus for the mistake? There's the mistake itself. And then there's the results that come of the mistake: the regret and the shame that come with it. We also discovered that buried inside of us all, there are schemas. There are ways that we see the world that help us to have a shorthand for how to react to things. Those schemas travel with us through our life, and sometimes they serve us well to give us an understanding of how to react to momentary situations, and other times when they're taken out of context, they don't help us quite so much.

So in my particular case, what was my mistake? What did I write about? And how does it relate to what I just talked to you about? I had been in the job at Sony for about 10 years. We were running the business well at the time. We had some very strict processes in place for how we decided to make movies. That was, at a certain moment, we would come together all around a table: the finance people, the marketing people, the creative people. We'd have all the facts around a movie and there would be a debate, and at the end of the debate we would either decide whether or not to make the movie and under what terms. That was the determined way to do it. In the case of The Interview, The Interview is a movie about two hapless journalists played by Seth Rogen and James Franco who, under the auspices of the CIA, go off to North Korea with the desire to assassinate Kim Jong Un. Everybody at the studio wanted to make the movie. They had already read the script, they'd done the financials, everything else. We were in a competitive situation with another studio, Universal. So we knew that if we didn't make it, somebody else would. It all came down to a specific day and moment in time. What I asked to have happen was a read-through where we would all come together—the actors, the creative executives—and listen to the actors read through the material to find out where the jokes were. So we all come together in a room. I am actually the only suit in the room; everybody else is dressed casually. Everybody else is very enthusiastic. We listen to the read-through. It does brilliantly; it's very funny. And rather than do what I would normally do, which is say, "Okay, fine. Now we need a process. We need to come together in a room and go through the process I described earlier," I jumped up and said, "Let's make the movie." That proved to be a big mistake because what resulted after this was the North Korean government hacked all of our systems, took everything down, enormous destruction was created, a lot of emails were released into the world. And so my decision in that moment was my mistake.

It was all bad. There were salacious emails between executives and actors. To your point, there were people's salaries that were released. There were movies actually up on the system that we had not released yet, like Karate Kid. There was the unproduced script for the next James Bond movie. It was all bad. It was a catastrophe. It was a genuine catastrophe for the studio at the time.

Well, we can come on to the comments of the president—he and I have since spoken and resolved matters. But at the time, really, the lesson to me when you're in one of these crises is a couple of things. The first is you have to put your day job to one side. You basically have to say, "Okay, fine. Each one of the people running their divisions need to run their business," meaning the person running the movie business, the person running the television business, etc. "And my job, the person at the top, is to manage the crisis." That's really your full-time responsibility. The second thing you understand pretty quickly is you are constantly having to make decisions with only partial knowledge. And those decisions are always 50/50 whether they're going to be successful or not, for the most part. If you don't make decisions with great rapidity and decisiveness, events will overrun you and you will no longer have any control of the situation. Your control is marginal anyway, because there's always a new crisis that comes up as the emails and new events come out to the fore. But if you're not making decisions on a regular basis, you're really going to be overrun. The way I personally dealt with it emotionally was I was very engaged when I was at the office, every day early in the morning till quite late at night. But when I came home, I turned it off. When I came home to my family—my wife and my three daughters—I really tried to put it to one side and pay attention to my family, and they were incredibly supportive in that moment.

Well, Josh's mistake, he had kept a diary and it got caught up unnecessarily in the Whitewater investigations. He had actually no part in that; he was just commenting on it in his diary. I think the point to the book, Yosi—if I really think about that, I've not had that question before—I think whether it's on the front page of The New York Times or the front page of Variety, the entertainment publication, or just you alone know about it, the problem for most people, myself included, is that afterwards you carry this sense of shame and embarrassment—shame really, and regret about what you've done. You have what's called the spotlight effect, which is you walk into a restaurant years afterwards and you still think that people are looking at you and that they're still thinking about that stupid thing that you done way back when. In truth, they probably have no memory of it and this is just something you're carrying around in your head. So in either instance, private or public, the whole point to the book is that we tend to avoid talking about our mistakes. We try to put them in the rearview mirror after they've happened, never to look at them again. That's actually a very unhealthy thing. The important thing, as soon as you can—and you need to have a partner to do this—is to try and get to an understanding of: why did you make that mistake? How maybe could it have been avoided? But equally importantly, what are you feeling about the mistake so many years later, and are those feelings actually justified? By going through that conversation and that process, it really does help you to get over it and put it in the rearview mirror as best you can. But if you don't go through that process, like anything, and try and stuff it down and bury it deep in your psychology, that is not a helpful methodology to deal with it at all.

I think they're sort of two different things. First of all, most ventures and most failures in those ventures—failure in general, as we define it, is when people come together, they look at the data, they analyze whatever information they have, and they make a decision collectively that has ambition, and for whatever reason it doesn't work. That's a failure. Not everybody actually has the opportunity to have a failure, because it requires a lot of things, right? Mistakes, on the other hand, are decisions you make in the moment. They're emotionally charged, you typically don't have a lot of information, and it's just a mistake and it results in regret. So, two different things. Now in terms of failing fast, I think actually that's probably a very good idea. A really good entrepreneur, as we know, has the capacity to fail and move on, but those individual failures are never large enough to bury the business. So they do make this calculation between the risk they're taking in any given decision and the reward, but most importantly, that no one decision will crater the business. In that case, I think the idea that once you make a mistake, barring that it has emotional consequences to you, you should just move on. We're talking about a different kind of mistake in the book. We're talking about a mistake that's done by an individual. That mistake, as I mentioned earlier, is typically because you have a schema. The schema is out of context, it's emotionally charged, and you make a decision that ultimately has a bad ending to it.

A couple of things. In the first place, you're the chairman of the board, meaning your job is to manage the board. It is not to manage the company; that's the job of the chief executive. The role of the board is to provide advice and make sure that there's good governance. You're not there to actually give direction to the CEO or certainly not to give direction to the management team inside of the company. That's overreach on the part of the chairman and certainly would be overreach on the part of the board. Your job, if the CEO is not doing a good enough job, is to make the determination ultimately whether the CEO is the right person for the job or not and replace them if that's the case. I think oftentimes board members—I haven't really seen that, but I'm sure it's the case—sometimes the chair of boards overstep and they get too deeply involved. The second thing I would say about both the chair of a board as well as the board itself is a lot of the real work of a board or the chairman of the board is done outside of the boardroom. When I say give advice, being the chief executive of a company is a lonely job. Ultimately, you're by yourself and the rest of the company reports into you, and you don't have anybody you can speak necessarily honestly with and ask advice of, particularly out of office hours. That oftentimes is the role of the chair of the board too. So I find that role most productive when you have a very close relationship with the chief executive.

And Warner, both.

It was about 12, 14 years ago and Snap was just starting. It was started in Southern California, in Los Angeles, near where we lived at the time. My kids were on it—there were about 25,000 people up on the platform. My kids were all using it. My wife liked it a lot because she didn't like permanence on the internet, which obviously was the thing that Snap was opposed to. She actually wrote Evan Spiegel, the founder of the company, the chief executive, over customer service simply to say how much she liked it and whether she could be helpful. An hour later, two hours later, Evan was at our house because it turns out he lived right around the corner. The two of them got to talking at length, and my wife wound up being, I think, the second investor in the company. Then Evan and I struck up a professional relationship. He came to see me a number of times for advice. Sort of once or twice a month he would come over—his office wasn't far from my own. Over the course of that, I became more and more involved with Snap until Evan asked me to join the board. That's really how it came about.

I think it's a more complicated dynamic. I think a couple of things. I think there is still a big appetite for traditional media, meaning scripted content, whether that be television content or movies. People still want to go to the movies. People still watch a lot of television. That being said, they also are watching a lot of things on the social platforms: Snap, Facebook, everything else. The thing that's limited is hours in the day. There's only 24 of those; nobody's quite figured out how to make a 25th. Everybody is trying to multitask and do many things at once. I've seen, and I'm sure you have, people in movie theaters and people in front of television sets looking at their phone while they're watching other things. But that's still the restriction. Right now, I think the dynamic and the play is between how can you get those people's attention within that 24 hours. Sometimes people are more inclined to the traditional media formats; sometimes they're more inclined towards the social media or the new formats. I don't know where this all plays out at the end. At the moment, it seems like it's going back and forth still. There's no clear winner in my head.

News and how news is covered is an entirely different thing. I'm not a journalist; I'm not as familiar with that.

It's interesting. In my experience with the two, they both value creativity and they both understand the star system. Meaning, there are people inside of these big tech companies—and you see how they're getting compensated in the world of AI—they see people who are extraordinarily talented in these areas, and in the entertainment business we have that too, whether it's an actor or singer or something like that. So they certainly share those two things. They certainly share a respect for hits. In the movie business we know what a hit is; in social, Snap is a hit. They understand that big things that are popular are of importance and that these things can happen very quickly and all at once. I think where it gets confusing is in things like vocabulary. They do talk very different languages. The Silicon Valley world tends to speak in terms of OKRs and KPIs. That's not something that you hear very often in the entertainment world. It tends to be a much more chatty, more emotional world too, although people get emotional in the tech world. But it's different in that respect, I think. There's a different level of regard for intellectual property. I think the entertainment business, which is built on intellectual property, has a much greater respect for that than is the case in Silicon Valley. I think the two of them need to have those conversations more, because particularly in the world of AI, which threatens intellectual property, the miscommunication between the two of them on that subject is a dangerous thing. So that bridge needs to be built as well. Those are two of the biggest ones, I would say.

Yes, it'll be a different ball game. I'm not smart enough to understand what that ball game looks like. I know in the case of Snap, it affects it in many ways. It affects it in terms of allowing us to reduce our cost structure, which is one of the reasons we just reduced the number of people we have inside the company, because as we all know, engineering is something that AI is very capable for. It affects our ad tech, because you can target much better with AI than you could in the past. I think on the entertainment side, it's already very much in the business. On the video side of things, film and television, it's already being used in post-production, editing, and in finishing shots, particularly with CGI and things like that. I think on the music side, we've already seen where potentially AI can generate new pieces of music that sound a lot like existing music, and so that's concerning as well. When you ask me where this will all be in five years' time, particularly on the entertainment side of things, which is right at the forefront—both are at the forefront—part of the problem is nobody knows, and it's very scary. While in my heart of hearts I think that a truly creatively led enterprise, something that provides something that's completely unexpected—I'm now talking about on the entertainment side of the ledger, not on the Silicon Valley side—that's something that only a human being can do. Certain kinds of movies, certain kinds of music, you can only imagine coming out of somebody's heart. I say that, but nobody really knows. In my heart of hearts, I think that great acting and great performing can only really be done by a human being. But as they show me more and more of the AI and more and more how it seems to replicate some of those behaviors, it's not that I have less conviction, it's that it makes you wonder more and more what this thing is going to be capable of in five years' time. So I'm sorry to fudge, but I think part of the reason why people are so nervous is that they just don't know.

Who knows?

For somebody who used to be an operator or a chief executive in particular, who then comes into the board role, I think the thing that requires the most restraint is keeping your hands off the wheel. Your job is not to run the company and not to give instructions to senior executives. Your job is to manage the board, provide advice, provide governance. If you've been an operator for many years and all of a sudden you're told that's not the job, but you sit there and see problems, even if you have faith in management, it just becomes a little complicated to get your head around how you're supposed to react in those moments. So showing restraint is an enormous piece of that, I would say.

It wasn't me, because I'm pretty careful about it, but I was definitely in a couple of board meetings where I heard people on our board who used to be chief executives saying to the chief executive or a senior management person, not even, "Here's what I would do," but rather simply say, "Here's what you should do." And then afterward, the chief executive calling me up as the chairman saying, "That is not helpful when a board member comes in and says it in those terms, and would you please somehow make sure that's not the way that message is conveyed."