From Tony Hawk to Microsoft Acquisition: The Bobby Kotick Story

First Tony Hawk and then Call of Duty was the game. That's what's incredible. It's still the game, it's still awesome 20 years later. I actually like business. To me, like spending time thinking about the organizational structure and the organizational design and how you tie performance and reward, I love that stuff. The thing that actually transformed the video game business the most was PlayStation One. Kids really couldn't detect three dimensions until they were about 14 or 15 years old, but over the decade that the PlayStation existed, kids had the ability spatially to perceive three dimensions at 9 and 10 years old because of video games. There's 200,000 able, capable unemployed veterans in the US. You go, you serve your country, you come out of active duty, you're three times less likely to find a job than an ordinary citizen. I'm spending most of my time on is finding jobs for veterans. I think we're probably close to 145,000 jobs.

I know. I didn't think it was for me.

Yeah. Well, so there was a CEO of Vivendi Games and he wanted to be the CEO of the combined business. And I actually was okay with that. And then the CEO of the whole company had so much compensation envy because, you know, French companies, they just don't pay. He actually thought, hey, I might be better off being the CEO of this company. I can make a lot more money than being the CEO of Vivendi. And so there were two guys who wanted it and they had 52% of the company, 51. So then you can play them off against each other. Well, this was like a, it was not a good situation. I like, you know, Bruce Hack, you never met him, he was a decent guy. And so we finally settled on like, all right, we'll be co-CEOs. And like a week before the deal was going to close, the French guys came to me and they said, yeah, we thought about it, we don't like the co-CEO idea. And to tell you the truth, we weren't going to keep him anyway. So we just want you to be the CEO. And I was like, well, does he know that? And they said no. And I said, I don't really like that. Like, we agreed we're going to be co-CEO. I don't think it's the right thing to do. And they said, well, that's our condition. You know, we want one CEO and we don't want him there. And we had to wait till now because if the deal didn't go through, then, you know, we would have not been able to replace him that quickly. And I said, well, how do I know you're not going to do that to me? And they said, you don't. Yeah, let me go to the bathroom and come back with a better answer. So I said, well, you got to tell him. And they said, we'll tell him the day it closes. So I called him up and I said, I got to tell you something. I don't feel good about this, but they're not going to tell you who I am. And I told him. And he's like, Bobby, I knew. He's like, you know, I negotiated a great payout. And he's like, tell you the truth, I don't even think this co-CEO thing works. He's like, so I really appreciate you telling me this, but sort of in the cards for me. He's like, and I got, you know, I'm older than you are. My wife's been working really hard for a really long time. She was a lawyer at Simpson. And he said, so we're good.

2008.

I was. No, that was the year I left EA for Zynga.

We've known each other since 1983.

No, he is the best guy. Like, our fear was always that Bing was going to run the company.

Yeah, they tried to buy us a bunch of times. We had merger conversations a bunch of times. You know, we talked a lot. There was a period, there was probably... so first of all, going back in history...

We actually had a bad acquisition.

We bought the company that was in Manchester that did the driving game for Xbox. And it was called... they had a good guy who was running the day-to-day, but he was like a brilliant guy, like a McKinsey guy. And he was like in strategic planning. But that wasn't a bet-the-company acquisition. It was 80 million and like we wrote it off two years later. But it was, everything about it violated all our principles. You know, we always like a really expensive MBA, that guy was an expensive lesson. But, you know, we had the Berkshire Hathaway approach to acquisitions, which is we wanted companies with a history of profitability, either a proprietary technology or intellectual property, right, a history of good management, management that we would keep, like not that we were looking to replace. We never changed the names or the culture. We just kept them as they were and tried to keep them very independent. And that was a different strategy than EA had. You know, EA, it's like if they bought a studio in Warsaw, Poland, it became EA Warsaw. Like, then you got a book. Bob Der gave me the book. I was like, this can't be real. It was like down to the cube color and chairs. You could only have what was in the book. So like EA's strategy was like to Electronic Arts-ify every single acquisition. You know, like Distinctive Sports was one of the great acquisitions they made, immediately became EA Vancouver. Ours is like, didn't matter what the studio's name was. Like, and we had some, you know, like we had a company called Neversoft. You know, like there's probably a decade where you couldn't have a company called Neversoft.

But, like, we just let the founders keep doing what they were doing. And there was only a couple of times, like Vince and Jason, where... and like, it's not like we didn't know they did it to you, so we figured at some point they're going to do it to us, right? But for the most part, that was like the difference. Was buy businesses that you like the founders and you like what they're doing and you know you stay out of their way. It made for happy customers because, you know, being a customer of some of those franchises, they didn't get the creative burnout that so often happens, you know, where you got to change out the development team, change out the management team because they really don't want to keep doing it.

No. I... how'd you meet him? So, you know, so I started a software company in my dorm room. And the only company that we talked to seriously about publishing the software we made, which was not game software, it was like application software, was EA. And it was when these guys started it. So, you know, they had just gotten started in '82, '83.

Yeah. So in '83, raised money a month before Atari announced they were about to die. And we came, I don't remember who introduced me to Trip, but so we came and it was the only company we talked to about publishing our software. And it was software and a mouse. And they didn't really have, productivity wasn't like the thing they were thinking about, like word processors and things like that. But ours was a, it was like a Macintosh-like piece of software but for the Apple II and the Commodore 64 because there wasn't a Macintosh yet. It came in '84. And my college roommate had seen a prototype of the Lisa. And he came back from France, he worked for this guy called Jay Miner, remember him? Great guy. And he saw this prototype of Lisa, came back and said we should make this Lisa-like software for the Apple II. And that was our first product. It was called Janus. And we went to Electronic Arts because their whole model was publishing other people's work. And we felt like, yeah, that's aligned with what we want to do. And then we started to negotiate and realize like these guys were tough negotiators. And so the first thing we did, we actually published on our own and realized publishing was pretty hard and we couldn't really get it quite right. And we just didn't really know how to do that. And so we're more product people than publishing people. And so then the next wave of things we made were, I was really excited about the Amiga. Like, I saw this... if that productivity software would have been a game, he probably would have been the EA CEO in 1991.

Yeah, maybe not. But I don't think Larry would ever let me be that. But so then we started making software for the Amiga and that we published with EA. So that was like our, that was probably '85, '86. And, but it was hard, you know, like you start out and you think, okay, these guys are your partner, but like they weren't really your partner, you know, it was like they're the partner but they get the big half. And so I started making a notebook of like things I didn't like about being in business with another company. And my notebook, I was looking for it before you came, I couldn't find it, but you know, my notebook was called Schedule C.

No, their contract had different schedules. Schedule C was computers that we were allowed to buy that they would advance us the money for, but they would own. And like we had this whole, it was like a limitation of like how many computers we could buy to do development. And it was, but they also had all these other like covenants and restrictions of like anything that they gave us, we had to give them money back for. And so my notebook was called Schedule C of like everything not to do if you're going to be in a publishing relationship with another studio.

Yeah. Well, also you had capital too. It's like, and I have to say, like there were good, like, you know, like Stewart was great. You know, it's like there were not a lot of people, like the game makers there loved making the games. And so they used to have these developer offsites.

Yeah, it wasn't like a fancy thing. It was like in Santa Clara at like the shitty hotel. And that too, by the way, the airfare, the meals, like went on the Schedule C. So it's like we're... all advances against royalties. But we would go and it would be like this organized thing during the day. And at night, all these game developers sitting at the bar complaining about Electronic Arts and like how much we hated having to be beholden to this publisher. And so like my head was always like, I just want to run my own thing and I don't want to be beholden to anybody. And but for, yeah, if these guys are going to hate someone, they might as well hate me. Well, I first thought of it as more as like we'll be the developer and the publisher. And then, but we didn't own any intellectual property. And so I bought a little licensing company that did consumer licensing. And it was public, $7 million. And they owned the rights to properties that you wouldn't even have been alive for, but like Charlie Chan, The Green Hornet, The Shadow, like these old comic book or animated film, the Marvel character universe without Marvel, DC. $7 million. But I bought it in 1989. And in 1988, they signed a deal to be the licensing agent for Nintendo. So all licensed Mario products went through this company. Bed sheets, breakfast, like they were a licensing company. But they happened to own some of their own IP. And then they had a toy development studio. So it was like another version of what we did. You know, but like I love the idea that we could take video game properties and license them out for consumer products. Because like Disney did that and made a fortune doing it. And I thought that would be a good... well, yeah, and we thought like that's a good capability. Plus they were very tight with Nintendo. So we buy this company and we would have monthly meetings with Nintendo. And the chairman of Nintendo was a guy named Howard Lincoln. And it was Nintendo of America, yeah. And so one meeting I was at with him, I said, you know, I also own a software company and I don't really want to just be your licensing agent. I want to make Nintendo video games. And he's like, hm, that could be a conflict. You know, you're a licensing agent and I don't know if it'd be a great idea to have you as a licensee. And I said, well, I'd rather do that. And he said, do you know Mediagenic? And I'm like, no. And he's like, it used to be called Activision. I'm like, oh yeah, I know that company. And he's like, well, they're not in really good shape.

I mean, I knew, you know, like... but he put a bug in your ear.

And he said you should buy Mediagenic. And like, wow, they're our number one licensee. And, you know, so the guy who ran Mediagenic was a lawyer. And there was a big lawsuit in the video game industry because Philips and the Netherlands owned this patent that was like a graphic chip patent. And it actually was a patent about how you actually moved pixels around on the screen. Most people just did like a license, paid nothing. Activision decided they didn't want to pay. So they got in this lawsuit with Philips. And Nintendo was also... Philips did a system called CD-i. It was before CD-i, this was actually for Magnavox Odyssey. And so they lost this patent infringement judgment to Philips for like $10 million. And the market value of Mediagenic went from 20 million to 2 million. So there was a venture capital firm in the Valley called Sutter Hill Partners. They're still around and they've been getting big returns ever since. And so Sutter Hill Ventures had put up the original venture capital for Activision and they owned a 25% stake through this company called Generale Pacific. And so we bought out the 25% stake for $440,000. And so we became the biggest shareholder of Activision. And Activision then had bought a company called Infocom, which made text adventures, like these incredible... it's like how I originally got hooked on video games.

Boss company out of MIT. They did Zork, Hitchhiker's Guide to the Galaxy. And so, but when they bought that company, it came with $700,000 of debt. And so we bought the debt. So now we were the largest shareholder and the second largest creditor for a million dollars. And that's how he took over the company.

I wondered about that too. And I looked at it, I always thought it was 78 or 80.

So good going, Bobby.

Yeah, I don't remember what the actual... because we actually gave the original... so it was bankruptcy too, that was the other thing. It was, the company was insolvent. And Howard Lincoln's law school roommate was the bankruptcy judge.

Howard Lincoln was a lawyer who grew in power and ran Nintendo of America. Nintendo, nobody in the US believed in. They did a test launch only in New York with only with Toys R Us in Christmas '86. In '87 they were an overnight success. And so by '88, every teenage boy in America, 35 million 8-bit NES systems had been sold by the end of '88. Wow. You know, it happened overnight. And people still didn't believe the video games were a thing at that point.

Then they did. But Atari's collapse, people thought, yeah, this thing's a fad, it's pet rock.

Later on, or the first one? The first ones, we were making money. I had a development company, we made money well.

Yeah. So in 1983, in June, my dad was a lawyer in New York and he had arranged for some friends of his who were investors, not really tech venture capitalists, but investors, to invest in our company. And I was at a party in Dallas with this girl who I knew. And I sit down at this table and there's this couple sitting next to me. And I started talking to them and they were like 40 and having this conversation. And I said, I was 19, and I said, yeah, you know, I started a company in my dorm room. And we're talking. And then the next morning I see them at breakfast at the hotel. And the guy said, you flying, going back to Ann Arbor? And I said, no, I'm actually flying to New York. And he said, we're going to New York, why don't you come with us? And I was like, you think this guy's pretty, he's not being charming yet. I said, well, what do you mean come with you? He's like, we just got a new plane, come with us. And I said, well, like, how does that work? I just go with you to the airport? He's like, yeah. I'm like, okay. And he had an MD-80, like a DC-9. You know, like people had Learjets in the '80s. This guy had an airliner. And I'm not kidding, it was like an airliner, you know, like a 200-passenger plane converted into a big living room. So I'm like, what the, who is this guy? And like, I had never been... you didn't know who he was really? I had no idea. Like, I'd never been to Las Vegas, never been to Atlantic City. I grew up in Roslyn, Long Island. You know, like, I didn't know about this stuff. And so I get on the plane and I asked him how he got started. And it was an unbelievable... this is where I was like, oh, this is like the most charming guy I ever met in my life. And he's like, you know, I was 21 years old and my dad died and I was just going to Georgetown Law School. I just graduated from University of Pennsylvania. And my inheritance was $30,000 that was owed to my dad by the Silver Slipper Hotel in Las Vegas, Nevada. And he ran bingo parlors. So I go out to Las Vegas and I get my 30,000. And he says, and I love this place, so I put the money up with a bunch of guys and I got a 1.5% interest in the Frontier Hotel. And 18 months later it was bankrupt. And I had a wife and a kid on the way and lost my whole inheritance and didn't know what I was going to do. And 2 o'clock in the morning some guy calls, wants to know who's in charge. And they offered to buy the company, which saved us from bankruptcy. And it was Howard Hughes. And he's like telling the story, I'm like, Howard Hughes, holy, like this is incredible. And he goes, yeah, and I met this guy named Parry Thomas who was Howard Hughes's banker. And he said, you're a smart young guy and I'm going to help you out. You got to promise me that someday you're going to help a young guy out like I'm doing for you. And he said, yeah, I promise. And so he's telling me the story and goes through the whole how he got to where he was, which is opening the Golden Nugget in Atlantic City.

That's a punchline. This is Steve Wynn we're talking about.

He was my first investor. But this is the good story.

I said, yeah, that's an amazing story. He goes, and I got to make it back, I got to make it up to Parry Thomas. So maybe I can invest in your company. And I said, well, I have investors. In fact, that's why I'm going to New York. I'm seeing the investors on Monday. And he said, well, if it doesn't work out or if you want other investors, I'd love to invest. And I said, thanks. I said, hey, you got a hotel in Las Vegas, right? And he said, yeah. I said, there's this thing called the COMDEX. He goes, yeah, I know what it is. And I said, you think I could get some hotel rooms from you for that COMDEX? And he thought this is the funniest thing. He's like offering to invest, like he didn't know how much money, but and I'm asking for hotel rooms. So I go to New York and I go to the meeting with my dad and the investors. And there was just something, I just didn't feel like it was the right thing. So I sort of, I blew the deal. My dad was really pissed. I called Steve Wynn and I... you're an idiot. He literally, he's like, are you kidding me? These guys are giving you $5 million and like you're 19 years old, you don't even know how to make software. And yeah, you're an art guy. Yeah, is a history of art major. And which probably already irritated him. So my dad liked art, but he... so he said, I called Steve Wynn and I said, you know, I blew the deal with these investors. He said, yeah, I knew you would. And I said, but I'm with my business partner and I need the money like right away. And so could we come see you? And he goes, yeah, where are you? I told him. And he said, oh, it's close. He said, my office is a few blocks away, just go to my office and they'll bring you to me. Said, okay. So I go to his office and there's like, it's like the biggest limo I've ever seen in my life. And these two like gorillas get out of the limo and they go, get in, Mr. Kotick. No, it was just like, get in. And we're like, where are we going? And they said, we're going to take you to Mr. Wynn. And they drive us to the 61st Street heliport. And my college roommate was French and he's like, what's going on? I said, I met this guy, I told you about him. And you get to the 61st Street heliport and the Golden Nugget Sikorsky is waiting. And they go, get in. And I've never been in a helicopter. I'm all excited, like this is freaking cool. And we get in the helicopter, we fly to Atlantic City. And then there's another limo that takes us to his office, which is like in the parking garage, like downstairs below grade in the parking garage of the Golden Nugget Atlantic City. And we wait like, I don't know, three hours. And he comes out, like the guy was like movie star good-looking in those days, fancy suit. Comes in, he goes, hey fellas. He goes, okay, what do we do again? Well, you know, we make computers easier to use. He goes, how much for a prototype? I said, you know, like $300,000 to make the prototype. He goes, okay. And he takes out his checkbook, he writes a check for $300,000. He goes, all right, we're partners now. I raise the money, you guys do all the work. He goes, who's hungry? I said, what do you mean? He goes, who's hungry? I'm starving. You want to go eat? I said, yeah, but you know, should we talk about the details? He's like, what do you mean? I said, we have, you know, contracts drawn up that we were going to use for the other investors. He goes, contracts? Contracts? You're my family now. He goes, I'll meet you in an hour at the steakhouse. Joyce, my assistant, will take you there. Clean yourselves up, we'll see you in an hour. Walks out. I'm sitting in the basement of a parking garage in Atlantic City with my friend, check for $300,000. And I look at my college roommate and I said, all right, we're in the basement of a parking garage in Atlantic City. This guy just gave us $300,000 and said we're his family now. We're going to die. You seen that movie? And then we go to dinner and he introduces us to his daughters. And like all of a sudden we're like, oh, he doesn't care about our business. He thinks we're like son-in-laws or something. Like he doesn't know anything about software and doesn't want to learn either. And so that was like the first $300,000. And then the only other check he ever had to write was we were refinancing the Activision business and he put up another million and a half dollars. But, you know, his stake would have been worth $25 billion.

So here's another great story. Did he sell it? Wait, I got to know. Did he sell it? So here's the story that I heard, because I run into him at a Sun Valley cocktail party and I said, you know, I was talking to Bobby, he told me this story about how you became an investor. He says, there's more to it than that. He says, Bobby called me up and says, Steve, did you see the news? Bought the company. And Steve goes, what company? He goes, well, you know, my company, the Activision. It's your company. He goes, let me, my company? He says, you're a shareholder. He says, I don't buy public company shares. I didn't invest in your company. I didn't do shares. What is all this? He says, no, no, remember that loan you gave me? No, no, you gave me a loan when we got started and I turned it into shares. What do you mean you turned it into shares? I sent you some paperwork, you signed it and you converted the loan into shares. He goes, I have shares? Where are they? And Bobby told me, it's in my safe. And he goes, in my safe? What are you doing there? He said, yeah, keeping them for you. He says, well, when do I get them? I said, right away. How much are they worth? And Steve looks at me, he goes, I'm thinking, you know, maybe nothing. But how much is it worth? Bobby goes, 35 million. And Steve turns to me and says, sold it the next day. And you know what I did? My wife had just divorced me and taken our Lake Tahoe house and I bought a bigger house with 35 million next week. And he said, you know, I love Bobby. He didn't have to let me know that those shares even existed. And I didn't know anything about it. He says, you know what, a guy, they would have been worth 25 billion. Yeah. He, like, it's so funny that he doesn't actually have the actual recollection of what happened because that's like a largely, like, the story he tells. Here's actually what happened, which is a much better story.

No, but it's actually, I'm surprised. Like, I guess he probably either didn't remember or doesn't want to quite tell like this part of the story. So first part, you're right. I called him and I said, you're public now. Stock, I think, was actually worth closer to 40 million. I said, yeah, we have a $350 million market value and you own 18% of the company. And I said, you know, we're going to have an annual meeting. We're going to do it at the Century Plaza Hotel in LA. We're going to have shareholders over and it'd be good if you came. You know, you're our largest individual shareholder. I think it'd be good for the company. And he goes, you got a $380 million market value? I said, yeah. He goes, what kind of revenues? I said, 60 million. He goes, how do you have $380 million market value? I said, it's crazy, isn't it? He said, you know, I think we had a $200 million market value when we had $500 million of revenues. He's like, you have a $380 million market value? I'm like, yeah. I said, will you come? It's in a few weeks. It'd be great if you came. And he said, yeah, I'll come. So he comes and it was 1994. And he had one of those mobile phones like this. And he's standing there, he's watching. And we do the presentation. We're like, yep, $380 million in four years. And, you know, here's what our plan's going to be for the next three. And I walk to the back of the room at the end of the meeting and he goes, how's this thing worth $380 million? And I said, I know, it's crazy. It's like, you know, we only made $2 million profit. Like, there's no rational basis for it to be worth this much. He goes, it's really worth $380 million? He calls Tom Weisel. You know who Tom Weisel was? Tom Weisel started Montgomery Securities. He funded Lance Armstrong forever. So he calls Stifel. He goes, Tommy, it's Steve. He goes, remember those kids I told you about? And Tom, he goes, Bobby Kotick. He goes, Activision. He goes, yeah. He goes, you know how much the company's worth? And he goes, you know, like on his Quotron, he goes, almost $400 million. He goes, how's it worth almost $400 million? Tommy goes, I don't know, Steve, but like that's what it's worth. He said, and Steve goes, well, I got the shares. He goes, how many shares do I have? And I told him. He goes, hey, Tommy, sell half the shares and put the rest in the trust for my kids. At my annual meeting, he sold 10% of the company. So two days later, of course, he has to file and like the stock goes down by like 30% because Steve Wynn sold half his stock. And then probably nine months later, because the stock went down to like 12, he sold the rest of it. But I think he ended up making like about that same year, went from 41 to 11 in a week at the launch of 3DO.

Well, that's much later. So yeah, you had a hard, hard kind of coal and pick, coal mine and pick for about a decade. And then started making good move after good move.

Every year we always had something good. And but the win was Tony Hawk.

Yeah, Tony Hawk was my era.

Tony Hawk's a great story. My brother-in-law was an agent at William Morris, like a big movie agent. And there was a family that we shared a ski house with and the kid became like a, worked in the mailroom, was like a junior agent. And his first client was Tony Hawk. Wow. And we were thinking about doing a skateboarding game. And the guy calls me, he's like, you know who Tony Hawk is? I'm like, no. He said, you don't? I said, no. He said, he's a skateboarder. He's like a world famous skateboarder. He said, he's the action hero for teenagers. So he said, you should meet him. So I meet him and I really liked him. And I was like, hey, you know, we're, I think we're going to think about making a skateboarding game and, you know, you want to do it with us? And he's like, yeah. And so we gave Tony like $300,000, which was like life-changing found money for him at the time. I think he had just gone through the third, second divorce and he was living in his car and few kids and, you know, desperate, desperate for the money. And so we signed him up.

Five-ish, less, like 1.5%. And we renegotiated over time. But so we made Pro Skater, did well. But Pro Skater 2, that was an awesome game. And that was like the explosion of the business in some way. And we also started buying up distributors in every territory. And that was a big thing because we realized, you know what, if you love the business, if you're 5% market share, 3% market share, why not participate in everybody's upside and own distribution in every territory? That was a Morgado, like this guy from Time Warner who came on our board. Warner Music did this, they went and they bought the record distributors in every country in the world. And that's how they expanded their distribution. But then it enabled them to sign all the artists because they had this big distribution, they could do a better deal, better guarantees at least. So we just started buying up the distributors. And that grew our revenues. And then 2000 hit and all the market values crashed. And the company's market cap dropped to like $150 million. We bought a bunch of stock back. But, you know, we were in a...

Tough situation for that moment because market kind of grit Mo moment number three. And I think that was the first time we talked to EA about doing the deal, and we could never get it. You know, it's like we'd have these conversations and never amount to much.

And then we started like getting aggressive about really blowing out the franchises, pruning like the number of things that we actually would make, applying much more rigid principles to what we actually would make. You know, like had to be globally appealing, had to be clear sequel potential, you know, had to be the number one or the number two in the genre. You know, we had to, the tech team had to be the best tech team for that genre of game design talent for that genre, or we wouldn't make it.

No, Guitar Hero came after Tony Hawk. No, Guitar Hero was after that. After, yeah, Guitar Hero was like 2004.

Oh yeah. Oh yeah. Every year. Oh yeah. Every, because then the expectation would raise to what it now became from this last hit, right? The first thing you do is you release another version and hope it sells better. A sequel of a movie, you're always afraid that the bucket is going to be empty the next time you go to the well.

Like what, the reason why we were so covetous of Electronic Arts is like we always thought like what do they have to change? The team rosters, coaches, FIFA 16, FIFA 17. We got to change the whole game. You know, it's like we always kept looking. It's like yeah, it's actually worth the royalty rate not to have to reinvent yourself in the same way that we did. It's like and they could count on 32 really greedy owners who were going to make sure that thing was going to be broadcast everywhere. You know, so like we actually thought their business in a lot of ways was better than ours and more stable.

The Blizzard business is even better.

So we bought, we merged. We tried to buy Blizzard just on its own and they wouldn't sell. And then there was a time when they had an ask price of 800 million, then they would have taken 500.

Well, Larry wouldn't meet with... well, I know as I both like Call of Duty and Guitar Hero and Blizzard, EA saw all those first and passing. All this is why I have double high respect for you saying no, no, this is, you know, once jolted I can get a better deal, but this is going to be good to own. And then you kept the people around and I'm pretty sure that some of those companies, the creative leaders would not have stuck around in another company. So you did some kind of a miracle of keeping them productive for long periods of time and probably biting your tongue from time to time.

Yeah, Blizzard was the one I have to say if I had any regret. And it was, you know, I think what happened with Blizzard. So those guys, I knew them since 1990 and we had them doing conversion development for us, like they did Shanghai for Windows 95. And but they sold the company for $7 million to Davidson Software, which was an educational software company.

And I was friends with these, the Davidsons, because there are not a lot of people in LA who were in the software business. And this woman Jan Davidson was a teacher, her husband was like in the construction business and he was a sophisticated guy. And they had this company making educational software and they bought Blizzard for $7 million. I didn't know that one. And I was going to have dinner with Jan and Bob and I get in the car, like in the minivan, and we go to the Chinese restaurant in Torrance and they said, 'Yeah, we bought Blizzard today.' And I'm like, 'How much you pay?' Bob said, '$7 million.' I'm like, '$7 million? Are you crazy? Like our whole company's only worth $35 million and like we have a real company. Like how $7 million? That's outrageous.' Dev shop.

And so then, but you know the thing that you realize is like, and it was mainly Morhaime, he always had seller's remorse. You know, he sold the company for 7 million and then it got sold five different times. You know, got sent, Davidson got sold to CUC, and then CUC sold it to Universal, and Universal sold it to Havas, and Havas sold it to Vivendi. And like all this time it's like the company keeps getting sold and people are making money except the guys who founded the company. And one of them was just really passionate about making stuff.

It was Allen. Well no, it was um, Allen. And um, this guy Allen Adham loved to make stuff and he's the entrepreneur. He and Allen really was the founder of Blizzard. He brought those guys in afterwards. He wasn't at the company when we bought it but we brought him back.

And so Mike just had seller's remorse, you know, and he always was like bitter and so it was really hard to like motivate him. And you know there was always this tension with him. With Allen though, it was the opposite. It's like the guy was a great entrepreneur, let me make cool stuff. And so I brought him back, give me fair comp and let me make cool stuff. And he also, he felt like he got disadvantaged on the compensation front because when we did the Vivendi deal, Morhaime made like $150 million and Allen made nothing. And so I convinced Mike to bring Allen back and I kept telling him, I'm like, it's like Steve Jobs going back to Apple, you know, like you're the founder, come on back. And he was incubating a lot of really, really good things.

And I was surprised Microsoft shot them all down, really. But there was one that the...

It wasn't Morhaime, it was Chris Metzen who was the other person I brought back. Because it is amazing, there was, it just shows sometimes leadership alone with replaceable parts is irreplaceable.

Yeah, but look, they had, when we bought Vivendi Games, you can't imagine what these guys were doing. They had 25 different development projects that were not the Blizzard franchises. They had a social media division, they had a mobile gaming business, they had like, you know, there were thousands and thousands of people. The whole company wasn't making any money, only Blizzard was. And actually only World of Warcraft was making any money, nothing else was making money. And so, you know, we traded control of the company and my view is like World of Warcraft is going to continue, but we had to figure out how to make it less taxing and demanding on your time, you know, because you couldn't be competitive and enjoy it if you didn't spend four hours a day playing it. And people would age out, like you know, you have kids, you just couldn't play it. But you'd be shocked, 150 million people churned out of World of Warcraft.

And over history, yeah. Oh yeah, it's a crazy number. You know, those are people paying $15 a month, like it was the best subscription business of all time. And so, except it could have been priced more highly. We never raised the price. I know. You know what my view was, like come up with value-added services, come up with new things to sell, but like just leave the price. Like that's interesting, we could figure out how to come up with other things to sell them. And it's a prickly audience, you know, like you don't want to like do too much to agitate them. And like even a dollar increase would have been a problem.

It's called Medal of Honor. Well, Medal of Honor was at, yeah, here's the story. Medal of Honor had an owner in like Oklahoma and a development team there who felt unappreciated. They came to EA and said, 'Well, can we do a deal with you?' And EA said, 'No, no, we're sticking with the old guy who owns it.' And they went to Bobby. Bobby said, 'Well, here's the talent.' So once again, you know, so Medal of Honor died soon after. Medal of Honor was a Steven Spielberg invention and Call of Duty went from being the little brother to being the monster. But the thing about it, like Medal of Honor's biggest year probably did 150 million and I think Call of Duty is like 2 and a half billion a year.

Yeah, so it's, you know, that's not little brother to big brother, that's, you know, that's rodent to T-Rex. But it's a great story. So I had a board member who was Spielberg's lawyer and he calls me and he said, 'Stephen wants to make video games, you know, he loves video games, he wants to make video games and we're going to come to you first.'

And the only time I'd really pitched anything gaming related to Stephen was I really wanted the rights to Jurassic Park. I was friends with Michael Crichton and I had read the manuscript and I thought it's going to make a great game. And I called Michael and I said, 'What do I need to do to get the game rights to this?' And he said, 'You got to get them from Spielberg, he owns the rights.' He started DreamWorks Interactive with Glenn Entis and made a terrible product and that's how EA got involved there.

Oh, did it? Yeah. So but what, like I built, I had to make a manuscript, like our proposal was a manuscript of like what we were going to make. And I put it in like a dinosaur egg and in a crate and like I went nuts. Like all I wanted, took the manuscripts in a dinosaur egg in a crate, delivered to Steven. And I had every one of my friends who was good friends with him, I knew him but I like, I had all my friends who were good friends with him call him and say like, you know, Bobby really wants to do this. And I called him up and I said, you know, what do you think? He's like, it's like great pitch, he's like great vision for what you want to do with the game. He said, I said I really want you, I want to do it. And he said I really would like you to do it. He goes, so pay the most money. And Konami ended up giving him some crazy guarantee and we didn't get the rights. And I was bummed too because I thought it would have made an incredible game. And because it was low quality when it was done, it kind of was a demo that never turned into good. Had full screen dinosaurs and it was kind of fun but it was one of those, it shipped when it was half done.

Yeah, and movies are always problematic because you never got the scripts, they changed the script, they wanted to keep control, like not let, you know, risk of the storyline coming out. And so it's very hard to make a movie into a great video game and vice versa. But you know, being here we thought like well there's things that we could license, like we did Spider-Man and that was a big success on PlayStation. But it was like the exception. And we realized we have so much IP in our library, why would we ever make licensed games? You know, we own Zork and give 10 to 15% to somebody just to inspire your development team.

And you know, even Pixar, like I loved being in business with Pixar because I love the culture of the company, but could never make money.

I would say it is actually the Blizzard, it was the same people for a long time with game designers changing but the leadership the same. And Blizzard, it was funny because Chris Metzen was like and is like to me the heart and soul of creativity of the company. And he left, he got burnt. You know what happened, they made World of Warcraft the movie, which I thought was a terrible idea. They had signed the deal before we had owned the company and it took a lot of resources and distracted them. And you know like you think about all these people who make video games for a living and now they have the chance to like make a movie and they're like helping with the casting thing and they're on the set and it's just a huge distraction. And like our expansions were late, you know, patches weren't getting done on time. And it just, but and the movie was terrible, it was one of the worst movies I've ever seen. They were trying to become Chris Roberts. And you know, but Metzen, I think he took it very personally and he just didn't want to work. So he left, started a board game company. And a few years ago I just was, I begged him. The guy who's running World of Warcraft who's not there anymore, he called Chris and said, you know, would you ever consider coming back and consulting? And then he called me, he's like, I don't know any of the people at the company anymore, you're the only guy I know, like is this a good idea or not? I'm like, dude, we got to have you back, it's a good idea, please come back. And he calls me, he had seen like the two expansion plans and he called me, he's like, they're not good, man, they need to be redone. And I'm like, just come do it, like you're the guy, come do it. And he was the heart and soul of the company in every way when he came back.

Hardly ever. You set up the context, the architecture, and let him do his thing. He became, what am I going to tell Chris Metzen about game design? You know, hope you're having a good day. I, you know, like I just wanted him to do his thing. And he, you know, the last expansion he had his fingerprints all over it, it's excellent. The next one is going to be great.

Overwatch, you know, like we never got involved in any of the game making decisions. But they had this big project, they spent like $80 million on it, was called Titan. It was this big ambitious like how to replace World of Warcraft instead of how do you figure out how to make World of Warcraft better, you know, and how do you deliver content to the players quicker, you know, still good content but you don't need three years to make an expansion pack, you know, it's like figure out how to satisfy your existing player base instead of letting them churn. And so they realized that Titan wasn't going to be a game and Mike canceled it. And Chris and Jeff Kaplan and a few other guys went to him and said we have an idea that's like from the ashes of Titan and we'd really like to make it. And Mike, to his credit, said I'll give you two years, you know, it's like we have the engine. Overwatch, it was Overwatch. And then they came to our like three-year planning meeting and all I saw was the artwork. Like I didn't even see the prototype of the game, I just saw the game characters. And I was like, it is the game of all time with the characters people most wanted to own. To me I was like I can't even believe this came from Blizzard because the Blizzard aesthetic was something dark and very different. And this was like the most hopeful, colorful, like Pixar-like universe. And I was like this is unbelievable, we're making this. And like I couldn't, I didn't even get to play the prototype of the game and I was just like we're doing that.

Couldn't have because I had to sign off on it.

Well yeah, probably true.

I think it's flattering in some sense but I also think it's maybe a backhanded compliment. I mean, all I know is talent. Well, here's what I would say is the difference though, you know, David when he sold the company, when he sold Geffen Records, it was a $200 million revenue company. He was never really interested in building an institutional quality company, you know, his wealth has all come from really good investments. And the thing I say about David that is, he's an unusual human being and I don't really know anyone quite like this. He knows how to pick talent in every discipline. Like you look and give him credit for just music. My best friend growing up was this guy named Eddie Lampert and Eddie was working for a guy named Richard Rainwater and when he was 26 years old David said come out of Richard Rainwater's firm, I'll give you $200 million, you invest my money. He found like the head of UCLA hospital, like the guy discovered like Mark Grotjahn the artist was David Geffen's psychiatrist's son. You know, like the guy knows, he has a talent to pick talent in every discipline. He can't read financial statements but like he knows what stocks to buy, you know, it's like all intuitive. And he's an exceptional guy. So like anytime I'll be compared to David that way I'll take the credit. But I think the one thing though, it's like I actually like business. So to me like spending time thinking about like the organizational structure and the organizational design and how you tie performance and reward, how you think about process and systems to prevent bureaucracy from like impeding the creative process, I love that stuff. So that was more interesting to me.

Not a bit.

Absolutely not. I have zero regret.

I wouldn't have sold it if I did. I'll tell you what happened. I got to a place where I was really worried about the industry. And this is what I started to see and it happened a few times before but there wasn't resolve. So like Disney, Warner, Paramount, all the entertainment companies came in, did badly, exited quickly. And they did it like in Disney's case like four or five times. We never had Chinese competitors. Like this was a whole new thing. And it's like where did these guys come from? And like look at the work ethic and the capability. And you know, Tencent, it's the biggest video game company in the world by a mile, by a lot. And they're in a market that we can't enter. You know, it's like you got to get a license to participate, you have to have a joint venture, your partner, or you have to license it to a local partner. They're going to copy the game and do something directly competitive. Can't get to those billion customers. By the way, they go to the office every day, 10 hours a day, six days a week. They don't need a vegan meal in the cafeteria. You know, it's like there's no like corruption in the culture, it's just work. And like people say, oh, you know, China doesn't have creativity. They have immense creativity. It's incredible like how creative the capabilities at Tencent studios are.

So now you have all of a sudden like Tencent comes in the market, you have, you know, Sony and Nintendo have always, you know, had a commitment to the business but they've also had the benefit of the hardware. Then all of a sudden you started to see like new entrants, Amazon, Apple, Meta, no profit incentive. You know, it's like every one of them wants to make games and they don't care if they make any money doing it. And I'm sitting here thinking, okay, we're this independent company with a, you know, 54 billion market value and you're going to now be competing against all these companies that have no interest in making a profit and two trillion enterprise value. I've seen the movie in Hollywood and I watched every one of these Hollywood companies move to a subscription model on streaming and destroy all their value. And I thought same thing's going to happen to us. Like we got to, and I don't know what our solution, you know, we were going to buy Time Warner, that was our solution, was, you know what, we'll take all the Time Warner intellectual property, turn it into video games, we'll take all our IP, turn it into movies and television. And then, you know, AT&T ended up buying it. And so we didn't get to do it. But you realize like, you know what, their business models are broken too. It'd be like two broken business models and no paying customers.

Yeah, well, not, you know what happened, I couldn't really talk to Jeff because who is that? He was the CEO of Time Warner. He was a college roommate of one and a great guy. And so he like, you can pierce to the truth pretty quickly. And the only CEO who actually had the balls to say, you know what, this whole industry is going to get devalued out of existence and I better get out before this thing is worth nothing. He also, part of his writing on the wall is he didn't have a direct consumer relationship. Yeah. And that was a big thing for him. But that's what we would bring, right? And that's why the combined business was an interesting idea. But they had a deal with AT&T. And the only reason that I raised the financing to buy it was I thought the deal wasn't going to go through because I thought the Justice Department was going to stop it.

And we were ready to go, like fully financed offer if AT&T didn't go through.

I still am. Like you went, like there was reports and again, like you tell me if this is right or wrong, but this was 2023, 2022, 2020, COVID, right? 2021, peak social activism in the workplace. There was a petition like a thousand people signed it that was F you and no, everybody, the board, the independent auditors, everybody was like this guy's done nothing wrong, we completely have his back.

So the Communication Workers of America union started looking at technology. They kept losing because they represented like the news guild, Comcast, and they realized they're losing members at a really dramatic rate. So they got to figure out how do they get new union members. So first they targeted a bunch of different businesses, Google, you know, some other tech companies, Tesla and SpaceX, and us. And it's the power of unions. I didn't really understand this until we went through this process. They were able to get a government agency, the EEOC, and a state employment agency called the Department of Fair Employment and Housing to file fake lawsuits against companies like us and Riot Games making allegations about workplace that didn't, they weren't true. But they were able to do this and they're so clever. They realized that would be a thing that they then could come into a company because we pay well, we have great benefits, great working, and they could say, hey, the culture is bad, you know, like people are harassed or they're retaliated against or there's discrimination. And so it was like the guy and the lady who ran CWA, they are really smart. They're not there anymore because they got fired. But so they came up with this plan, they hired a PR firm and they started attacking our company. They got these two agencies to file these lawsuits that claim like there was some sexual harassment in the company. We didn't have any of that. And ultimately they had to admit that it was not truthful and withdraw the complaints. But this is the way that they, but they don't have any liability for doing it because it's privileged and the damage is already done.

I've seen it in another company. They knew in advance that a lot of the press was made up by union activists. I didn't know any of it. And my general counsel came from Procter and Gamble who was like the, you know, like we hired a lawyer from Skadden 15 years ago to run our compliance department and she's a killer. And like I'm one of those people, I don't, I think it's probably from my like upbringing, but when I heard about like things that were inappropriate conduct in the workplace, I just fired people like on the spot. My view is like you don't want to have a culture where there was any kind of like discrimination, retaliation, misconduct, like you just don't, like it's bad for recruiting and it's bad for retention. And I mean think about it, I dated Sheryl Sandberg. You think we had a problem with pay equity and gender pay at Activision? She literally wouldn't do a Lean In circle at the company until I showed her our pay equity filings, I swear. So like my general counsel said, yeah, we got these investigations but like we're not, we don't have any issues, we're not worried about this. And he said, you know, came to the board, said, yeah, we got the EEOC and the California Department of Fair Employment and Housing but you know, we turned over all of our documentation, we don't have any issues here, this is not something to be concerned about.

Yeah, but like you're a sophisticated person. So this is what happened. So like, I've never actually told this story but I guess now I can. So Trump administration, when they banned TikTok, Stephen Mnuchin and I were friends since high school. And I called him and I said, what's going to happen? And he said, they're going to sell it. And I said, to whom? And he said, Microsoft is like really the only bidder. If you want to do something, you better do it quickly. So I called Doug Leone, I said, what's the deal? And he said, I'm going to send you a one-page sheet, this is what the terms are, they're not negotiable and we got to get it done right away. And I said, would you rather have me, would you rather have Microsoft? He said, call Yiming. I know the founder of ByteDance pretty well, he's a great guy. And he said, call Yiming and talk to him, see what he says. So I called Yiming and I said, would you rather have Microsoft, you rather have me? He said, probably rather have you. And he said, I don't even know what's going to happen. He's like, this all just happened. And so I said, well, it may be tough to pull all this together and I don't know that I'm going to have the resources to do what will need to be done. Like we don't have top secret security clearances with the government, I don't know what the national security issues are going to be. Would you mind if I call Satya and just see if he'd want to do it with me? He said, go ahead. So I called Satya and I said, I don't want to bid against you, like it'd be great if we were partners in this. And you know, I think we're more of a consumer company than you are and I think I know a little bit more about social media than you do and we should do this together. And he said, look, we're further ahead than you, I don't even know if this deal is going to get done, I don't need a partner in this one. And he said, but if the deal doesn't get done, we should sit down and talk about us buying Activision.

2020.

You want to laugh? It's so funny you say that because they said like, there's, we don't really have a job for you at Microsoft. And I said, there's only one thing I would do. And they said, what's that? I said, I would want to run the hardware design team. I've always wanted to build a console. And I think I could put a team together that we'd make unbelievable hardware. And you know, they didn't want, they didn't, and they're right, like you don't want a really rich guy who, you know, is...

Well, that's part of what I wanted to do in the world of OpenAI and Nvidia. Imagine an LLM chipset in a home console because now the processing is a lot more valuable than memory.

They then re-architectured hardware right now, you know, like oh no, they're trying to get out of it and put all in the cloud even though it's still the best way to instantiate a brand with consumers.

Well, the funny thing was I had just gotten the new Samsung phone and I had it in my bag. And they're saying like, oh, you know, you don't realize but we know like this is going to be like the big future and all the processing can be done in the cloud and Microsoft's going to have this big advantage. I'm like, you guys know nothing about gaming. And I took out my new Samsung phone, I said, see this phone, the microprocessor is an octa-core processor. The graphics processing in it is better than the PlayStation 5. There's eight processors in here that are all more powerful than anything in a game system. And I don't need to go to a cloud and waste the money and the expense and run the risk of latency and processing a cloud which is, I don't know, 25 cents an hour for cloud. It's on here. I'm going, this thing will, this has Wi-Fi 7, I could broadcast at below 20 milliseconds to any Samsung TV. This is better than any video game console. This is where games are played. So I don't know what you're talking about in the cloud. It's like that's for storage. You know, it's like yeah, our games, our big games are like 130 gigs, you may need some storage but the phone is where the processing is going to take place. And they like were like, what? You know, like throw us a bone.

Okay.

You can, yeah.

Well, it's funny, I was in New York.

I was in New York the day of the election and could have gone anywhere to watch the election. I went to Polymarket.

No, they're only, no, they're nervous, they're working their asses off. Oh yeah, their question is what happens tomorrow. But the crazy thing was there was not one time during the day where Trump was less than like 61 or 62%. And like it was a certainty. And there was probably $3 billion of wagering on the outcome. Like you knew from 10 o'clock in the morning that Trump was winning.

There were people, they got to actually, they were so worried about the Polymarket influencing the outcome of the vote that they were getting people to take the other side.

Um, I can't really talk about it.

Market has it at 10%. It depends when this is published. Yeah, I can't talk about it right now.

I think if not that, something I'd like to see operating rather than just investing.

Spending most of my time on is finding jobs for veterans. And wow, I started this thing 12 years ago. The Microsoft folks are great about it, like they let me keep the 501(c)(3) and they—that's a Call of Duty, yeah—and they gave us five years of some funding. Not a lot, I mean most of it is coming from me, but you know, you look out there and you realize there's 200,000 able, capable, unemployed veterans in the US. And in a recession, the unemployment rate is going to be three times the national average. Think about that. You serve your country, you come out of active duty, you're three times less likely to find a job than an ordinary citizen. How is that even possible?

Amazon has been a great partner for its recruiting events and they turn out to be spectacular. They're fulfillment centers because they know how to operate with discipline, you know, against kind of minute-by-minute goals. And also they know how to treat other people with respect around them. So yeah, we had a lot of obviously at Activision, but you know, and this started with something not related to Call of Duty, but we've, you know, started 12 years ago with Obama. His first national security adviser was a former Marine commandant named Jim Jones. Awesome guy, played basketball, went to Georgetown, played basketball in the Hoya. His dad was CEO of International Harvester. Guy is like one of the great guys. And I met him and he became co-chair with me of this thing. And guy's just fantastic. But we've now, I think we're probably close to 145,000 jobs.

So the way we're structured, it's a very small overhead. Every dollar goes to placement. And so we fund nonprofits that actually do the work, and that'll build a support system. But then what they do, and there's probably 25 of them, but they go into the HR departments of the companies and they help them to make sure they know how to do transitioning development. Make sure that, like, you know, the interview process doesn't somehow, you know, it's not unfavorable to a vet who isn't really trained on how do you interview for a commercial opportunity. And the nonprofits are incredible.

Well, we hired like my chief administrative officer was an Army Ranger. You know, we had a lot of people. You brought in a lot of people from the outside of the industry. I always did, because we couldn't find people in the industry who, other than game designers and programmers, but even programmers it was very, very hard to find really skilled programmers as the technology is getting so much more sophisticated. But so there's this one guy in the Southeast and he started this thing called Hire Heroes USA. And I don't know how he did it, but in like the three years we were funding him, his cost per placement was lower than anybody else, the quality of the jobs was better, and the volume was incredible. And we were struggling in San Diego, which is a very big veterans population. We didn't have any nonprofits that were doing a great job in San Diego. So I didn't know the guy, but I called him and I said, hey, I'm on the board of Coca-Cola, I come down to Atlanta, I'd love to see you sometime, but I have an idea for you. What if we gave you the money to open up in San Diego? And he said, yeah, I'm open to that. You know, want to understand like what your expectations were, what not. And I said, you know, we looked at your 990s and you don't take a salary. And my guys tell me that you got three kids, you're married, you know, you got to take a salary. And he said, we can talk about that too, but you don't have to worry. I got part-time employment, I make a perfectly fine living. You know, if you're thinking about the money, instead of giving it to me, put it in the grant that you're going to give me to open San Diego. So I go down there with a check for a million dollars for the guy. So it's three years of compensation. And he starts giving me a tough time. He's like, I told you I got a part-time job, I don't need the money. Put the money into the thing and we'll find more jobs with that money. And I'm like, I'm curious, what's the part-time job? And he goes like this, I'm the number seven Ultimate Fighting Champion in the world. And that's the guy. You're kidding me. Wow. Wow. So he's the guy who like really, he built Hire Heroes USA. Guy's incredible. What a story. And but these guys, like you spend time with them, he had to got some kind of national recognition. Well, he's well known now because he does UFC commentating. I mean, like a presidential medal or something should have gotten it.

I would. He knows I would. I would have worked for him. But you, I got to tell you the one thing that's like an important fact. My business got started in Floyd Kwame's guest house. Wow. So like, you know, Floyd has a son named Mark, lives in Ohio now, right? Yeah, Mark Kwame. And my business partner, I started the first company with, shared a cube at Apple Computer, France West. And so, and Mark became my good friend. And when I started at Apple before going to Kleiner, he was so, Floyd was at Apple and when John Lasseter was at Apple, yeah. And so, and my college roommate was working for John Lasseter and Mark was working for John Lasseter. And then when I started going back and forth working on software for the Apple IIGS and the Apple IIc, which was like the thing that was the breakthrough for us, I was living in Floyd's guest house. So like Kleiner figure is very significant. He was at Apple then, but he then transitioned and threw me out of the guest house. I had to fight Esther Dyson to get that guest house.

Yeah, it's funny, you know, like I don't know her really well, like I've met her a bunch, but I don't know her, you know. But like my Steve stories are like, those are legendary. Amazing, especially Pixar, you know, for me. Like Apple I, he was like, you know, my Steve story about Pixar. We're at a, he was close with a best friend of ours, we were at their wedding up in Napa, and we're at the table with Steve. He goes, I don't know, I took over this movie company, I wasn't doing very good, animation company called Pixar. He says, you have no idea how much easier the entertainment business is than the tech business. He says, this is going to be so easy. And you know, he proceeded to make about 10 number ones in a row, all 90 Rotten Tomatoes rating. But at that point, he was just, this tech business you guys are in is hard, this business is so easy. Going, whoa, you go over to Pixar, think it's not an easy business to run where everybody builds their own house for a cubicle and you know, you have 200 people, 200 expensive people building one thing every two years. But he came in and said, this is so much easier. Yeah, we were making, I think it was Toy Story 2. And I hired a lot of people out of Procter and Gamble. And Procter, like, they had great business discipline. And if you could find the people who are entrepreneurial that didn't really fit into Procter but didn't stay too long, they were the ones who had the good business process skills. Not too much Steve. Steve Case, a great example. Scott Cook, Intuit. You didn't hire Scott Cook? Well, he was like one of my early inspirations. He started Intuit when I started my first company. And in fact, the only real article there ever was about my first company was in Forbes, and there was an article on Intuit's founding at the same time. Wow. But like, we loved Procter people. So I hired this Procter guy, I think he's still on the board probably at Procter, I think he is. And so we hired this guy, Dutch guy, loved video games, and he was choosing between Koch and us, and he ended up coming as our president. And we were going up to a Pixar meeting to talk about Toy Story 2, and we're going to show him the latest build. And so he comes to my office and he said, you know, there's a lot of open business issues with Pixar. I'm like, there always are, you know, like we figure out how to resolve them, but there's always going to be open business issues with those guys because not a lot of business people at Pixar. And I said, make sure that the build looks good and works great. And I said, one thing you want to do is like go a few hours earlier, set up the device. Like we can't have any technical problems. Steve comes to the meetings, John Lasseter comes to the meetings, like no crash bugs, no glitch. And Steve slams the door in your face. Yeah. And so like, just you know, like that's real, the most important thing for the meeting. Next day he comes back to my office with like a printout. I don't even think it was PowerPoint in those days, I don't know what it was, but it was like a printout of like 50 pages of business stuff and like market research and I don't even know what it was. And I was like, what is this? And he said, this is what, you know, the materials we're going to use for the meeting. I'm like, no, Pixar meetings, we show the build and then we talk about it. That's like what you do. And he said, when you hired me, you said you're the president, you get to run the day-to-day operations of the business. It's how I like to run things and like I want, you know, I'm going to use a deck in a presentation so we stay organized through the meeting. I said, okay, okay, you could have five pages and the headings have to be in Helvetica 14 point and the body copy needs to be Garamond Condensed 12 point. A third of the page needs to be a picture of the game and you can have no more than five bullet points per slide and five slides. And the guy looks at me, he's like, wait, you're telling me how many pages I can have in a presentation? I said, and the fonts and the number of bullet points. And he's like, I'm not sure this is the right job for me. And I'm like, I'm telling you, Ron, you got to trust me on this. I've known the guy since 1983. He's coming to the meeting, I know how this works. All I want you to do is be successful. Please listen to me and I'm not going to tell you anything else. Just please listen to me on this. We get in the van at Oakland Airport and he gives out the deck and it has six pages. And the last one is focus group results. And I said, what is this? And he said, we got a focus group in yesterday, I did a focus group and here's what the feedback was. I wanted to summarize the feedback. I said, why? He said, well, we thought it was important for them to know because there's some changes we're going to need to make and you know, we want to show them that it's actually based on real data. I'm like, take it out. And he looks at me, he goes, look, I've done everything you asked, you know, like I got it down to the five points, I agreed to the five bullet points. He's like, look, you got to give me some latitude. I said, as long as you will fully own the consequences of doing this. Okay, I'm telling you for your own best interest, it's not a good idea, but you're going to own the consequences. He goes, what do you mean by that? I said, if we get terminated our license agreement, I'm terminating you for cause. So I just want you to know like that's what you're signing up for. And he's like, look, you know me, I'm an accountable person. If things don't work out, you can hold me accountable. I said, you got it. I said, hey, don't pass the things out until the end of the meeting. We walk in, we sit down, he passes the thing out. Steve takes the thing, gets to the last page, looks at me, goes, what the fuck is this? And I said, ask Ron. And he said, you know, we got some focus group results and some feedback and we want to be able to make the changes, but we didn't want you to think it was just capricious, like we want, you know, it's based on data. Steve goes, do you think Gone With the Wind came from a focus group? Do you think Chinatown or The Godfather came from a fucking focus group? He goes, you think great entertainment comes from market research? You're in the entertainment business. That's not how you make great entertainment. And he looks at me, goes, where's that guy from? I said, Procter and Gamble. He looks at me, he goes, get the fucking Procter and Gamble guy out of the room. To Ron's credit, he got up and he walked out. And he waited. And Steve was like in one of these things. But did he also resign? Nope, I didn't want him to. He was great. Now he was more valuable. He learned a lesson, did the right thing. But you know what, Steve gave me like a hard time for 10 minutes. I was like, and John goes, can we look at the game? So we had a really good build, so we like put the build out. And Steve was still pissed off about everything, but we got through it. And it's one of those lessons though, it's like it will stick with me for the rest of my life. Like he's right, you know. It's like I've never seen any market research things that we've ever done in video games that has been particularly useful. And we have all these people doing all the stuff. And now you can do a lot with data that's very different. But like from a purely creative perspective, that stuff was all a waste of time.

Oh, are you kidding? When we were, I had a fight with him for 45 minutes about whether or not you select the text and boldface it or select boldface and then start typing. Yeah, when we did our first software, when he showed me the prototype of the Macintosh and he said, I want you to do this on the Apple IIGS and the Apple IIc. Like, you know, I was absorbed in the culture of Apple. I'll fess up, Apple to you. So your first company, my first company made software for Apple. And you met him then? Yeah. And he told you no? No, no, no, the future of this business. Steve was much more reachable then. Floyd Kwame set up the meeting and then he, I, we made a mouse. There was a joystick company called Wico, remember them? Chicago joystick company. We made a mouse for the Apple II. We brought the mouse and our software, we showed it to him. And he looks at the mouse, he's like, this is a piece of shit. And he threw it on the floor and he goes, why would you do two buttons? It's like so complicated. And you know, we were basing it a little bit on Xerox's Palo Alto Research Center Star workstation, which is what he based the Mac on. And they had a system called Alto. Yeah. And so we show him the prototype and he pulls out this little blue bag and he unzips it and he pulls out the prototype of the Macintosh. I never, you know, it's like this is 1983. And he turns it on and you know, the big bag, the 'hello' comes up. And I would say to this day, of like moments other than when I saw the prototype of the Wii, there's not another moment where like I looked and thought the world is changing. Wow. Actually, first time I used ChatGPT, I think also goes in there. But it was like, so three life-changing creative moments.

No, fishing. Fishing. Yeah. And it blew your mind. I was in Kyoto. Miyamoto was there. And Miyamoto always liked fishing. Who's that? He's the best game designer in the history of video games. He's the Nintendo guy, Mario and Zelda. Okay. He's out, he was basically a plush doll creator, animator who started making video games that were a fun way to play with the creatures he wanted to create. Okay. So we go, and it was, let me think about when that was. So it was, what year was the Wii? Whatever year it was, the early 2000s somewhere. So we go, and I wasn't expecting that we were going to get to see a prototype of new hardware. I thought it was just our regular like annual get together, which was always a new system with less processing power than anybody else and a little cheaper than anybody else and always some good games on it. And I had developed a really good relationship with Arakawa, who is the first out-of-family CEO that they ever had in Nintendo. And there's a book about his wisdom too. Guy was, I love the guy. I was crazy about him. And he was an incredible CEO. And so we go, and we go into this room and there was like, it was probably, no, it was, I think it was a CRT, I don't even think it was an LED. And there was like a black thing that was sitting on a box. And they just said, you know, Arakawa said, pick it up. And I go like this, and all of a sudden I feel the force feedback. And like it didn't take any thinking, I just went like this, and there was a pond, there was just a pond on the screen. Oh wow. And I go, and my lure drops into the pond and it splashes. And I start going like this and like this and like this, and you're feeling the force feedback. And then I got a fish and I went like that. And I was like, this is going to change video games forever. And that by the way was the first feature of using the rumble pack in Zelda. That's crazy. Yeah.

No, I think the Wii actually, well, depends on what you're talking about, what type of games. Okay. There's two or three games that I would, that I still play today. Still have an N64. My favorite console all time is a Genesis. Mario Kart and Super Smash Bros and GoldenEye, those three games. GoldenEye is still the best gun game ever. Those three games on Nintendo 64, I could literally play for the rest of my life probably. Also, defining...

We made a sequel. And it was a challenging thing to make because, I appreciate this too, but Barbara Broccoli did not really want anything that was violence and she didn't really want guns in the game. She owned the Bond franchise. She still does, doesn't she? She's the one that's not letting it, they can't make more Bonds right now, isn't she? Isn't she holding it up? And I don't, I mean I read that, but what I'll tell you is she and her brother, like they are great custodians for the IP. Yeah. And I understood where she was coming from. She's like, you know, if kids are going to play it, I don't want guns. Can you do something other than guns? And I was like, no, because the expectation is going to be the original GoldenEye. You got like, that's what we have to do. And we struggled with being able to actually get something done that would be great. But I thought that making a GoldenEye was a great idea. What we heard was, you can no fragging, you can't shoot anybody in the back, and there always had to be a big water scene at the beginning of the game. It's like, okay, well we can put up the water scene, but you can't do an open world shooter where you can't shoot somebody from 360 degrees. No, it started with no shooting. Oh, I never heard that. That's crazy. Yeah, no, I went to the meeting, I was like, you know, it's just not going to work. All we're going to do, we're going to drink martinis. But those games for N64, absolutely. But I think like the thing that actually transformed the video game business the most was PlayStation 1. The entry of Sony legitimized, because there was a whole generation that had Trinitron TVs and believed, now this is real, that legitimately, and it was a great architecture because it was the first, you know, like 3D, but being able to do real-time 3D. The Emotion Engine. Yeah. And like that would, you know, there were some studies that I had heard about, I haven't actually seen them, but I heard that over a 10-year period of time, it was studying kids' brains, and that spatially kids really couldn't detect three dimensions until they were about 14 or 15 years old. But over the decade that the PlayStation existed, that kids had the ability spatially to perceive three dimensions at 9 and 10 years old, all because of video games. Thanks for getting better fighter pilots. Wow. Better robotic surgeons. And so, I mean, it's hard to say like what is your favorite, because it's really dependent on like what games were on what hardware device and where, what time of life you were at at the time. Yep. But what I do feel is like there's not good hardware innovation anymore. More of it's coming on this totally than it is on anything that's dedicated. Totally. And I would love, like I was hoping, you know, Oculus or Vision Pro, like they would get to a place where it would actually be compelling. It's just not yet. Not yet. I think it's taking a long time. I thought Oculus more of a software problem, but both. I mean, if 25% of people put something on and they get nauseous in the first 15 minutes, it's not really a mass market product. Yeah. Unless it's alcohol. Yeah. But you can't count on that for other than a third of the market.

Getting the deal done was really getting it done. And then you had to come into just a broken organization with a bunch of broken spirits. Well, the union attack, getting the deal done with Microsoft. Yeah. Oh, getting that deal done, that was your hardest. Wow. Yeah, that was like, but it lasted a long time. Well, you know what happened, we didn't have a person that did government affairs or public policy. Like it's not a thing for video games. So you know, we don't have an office in Washington. And our view was like, Microsoft is great at this. But we negotiated a very big breakup fee because I was afraid maybe the deal wouldn't get done. But they have an awesome team. And probably the first time in 25 years you weren't in control of your own destiny. Like nothing, not at all. And it wasn't going well. And so I had to step in. And I have a lot of friends in government, but not like professional relationships, you know, just by coincidence I happen to have a lot of friends who are in government. And so we had to like rethink how do you approach going to these governments and getting the approvals. And you know, we had to extend it for 90 days because the deal didn't get done. The UK too. And it was the UK that was the big problem. And so it looked like the deal's get done without the UK. It couldn't. No, no, they had too much business in the UK. And so I would say that. And then the rep, like even though all of the stuff was retracted and the state actually publicly acknowledged that we didn't have any workplace misconduct, that moment, that time of time, like we're, you know, you're on Fortune's best places to work and most admired company list year after year after year. It's like the thing that I actually felt like was one of our greatest accomplishments as a workplace was our workplace, like having a great culture that people loved working at. And like reading and seeing this misconception of the workplace that was like of almost anything that you could say about the company, like not having good compliance practices is the thing you could never say. And factually, yeah. But it's also, it's like personally offensive to me. And so like that, just having been tagged with that, you know, that was hard. And but the, you know, the time of like not being able to run the company and being fully focused on trying to get a deal done, you know, I'm not like, I wasn't doing what I enjoy. Not the job you signed up for.

I think like we're philosophically aligned on almost everything. And I think we've always had this relation where if one or the other of us felt really strongly about something, then we just defer to the other person. And you know, we had very different roles, like I was the day-to-day person and he's the chairman. And but you know, I talk to him every day. And you know, it's when you can actually have your best friend as your business partner, it's a pretty remarkable thing. And it works. Bruce Springsteen once said, you know, it's imagine having to work your whole life with your four best friends from high school. That's the problem with bands. And yeah, you started with somebody young and went through kind of a lot of success, some ups and downs. You guys seem from the outside anyway to be productively joined at the hip for a long period of time. It's not from the outside, it's from the inside.

He is an incredible CEO, incredible. And I would say the things that really, you know, and I didn't know him very well, but he has incredible empathy. Like wicked intellect, which you would expect, but you know, because Bill would and Ballmer would never tolerate anybody that doesn't have just wicked intellect. But he also, he gets right to the priorities. You know, it's like the clarity with which he sees like what needs to get done is incredible. I mean, I just look at what he's done with AI. He realized that they were, you know, deficient in talent. He realized we were deficient in technology. And he just seized on Sam. That big, really big, that early in a structure that actually couldn't get easily attacked by government because he knew like he was going to be under the microscope. And then brings in Mustafa and made sure he had a backup bet. And you know, the only thing actually has surprised me is like one of the big opportunities I thought was going to come out of this was it's very hard to find talent in the video game business and especially really good technical talent. And then if you look in like certain disciplines, AI, machine learning, data analytics, even harder. If you love games and you have that capability, we can get you. But if you want to solve big complex AI and machine learning problems, we can't get you. You know, Microsoft is going to get you, Google's going to get you, now like Perplexity and OpenAI are going to get you. But we were having a hard time. I thought we'd be able to tap into all these enterprise people, right? And they had 200,000 amazingly talented people. And I felt like we'll get them because we're like the fun part of the business. We couldn't. We still can't figure out how to. It's not even a 'we', it's like they don't seem like Microsoft gaming, you're saying? Well, like for Activision Blizzard within gaming at Microsoft, we haven't been able, they haven't been able to tap into the talent. It's kind of, it's kind of a 20-year history of kind of empires within the company that don't cross over. Yeah, because it's not business units, they're all, it's matrix, like they're product units. You know, like the whole business is this funky matrix. And I guess it works obviously, it's just not very resilient to change. But also like, you know, crossing the divide into gaming, like it's just not easy to do. And I was really worried that not just that the business model was going to get attacked, which that's obvious. And like that, that was the only disagreement. We got the deal done in three days. And the only disagreement we had over like the future of the operation of the business was Game Pass. And I said to them like, Game Pass is a one price for all subscription of otherwise $60 games, saying unlimited, an unlimited subscription from Microsoft for any game. Yeah. And my view is like, we have a game called World of Warcraft that we have $15 a month for one game. Yeah. Why would I put that into a Game Pass where it's like with Spotify where suddenly you get, you know, 50 cents a month. Right. And for the best. Yeah. And I said to these guys like, it's why trade out flexible business models where you can do what's actually in the best interest of the customer. You look at like Candy Crush, you know, Candy Crush, we only monetize 2% of the audience. And it's, you know, when we added ads, we added another $400 million of operating income in two years. You know, like why would you, you know, and like, and why would you give it all away for one price? You wouldn't. And also I really like, I was so sold on, you know, this is the funny thing with the water, before he died, I used to, he used to say, you know, what do you think about free-to-play games? And I was like, a son, free-to-start. That's a good one. I haven't heard that. Yeah. I think free-to-play mobile games now average about 25 cents an hour. So yeah. You know, in World of Warcraft, last I heard, about 19 cents an hour. So like 26. But like, there's like, I didn't believe in that. And I, but like, you know, the beauty of your Microsoft, it's like you could take that bet. You know. And I so far from what, like, I tried to, you know, like I look at what happened at Disney. And you know, when you do these things, you got like, you know, Phil Spencer's a great guy. This is probably not a while, he's a Microsoft games leader. So I hired Phil to come run one of our business units. I didn't know that. And he calls me up and he said, they just offered me the head of Xbox. And I said, dude, like, take it. You know, I want you here and I would love to have you here, but like, that's your dream job. And so go do it. And but so like, I was ready to hire him to come probably be my successor. And so that was an easy part of like doing this deal too, was like, I knew the guy, liked the guy, and I thought he'd be a good steward, really good steward for the business for the future. And so so far what I've heard is they haven't really changed too much. And you know, the, there's no corporate infrastructure anymore, so it's back to like all studios. And people seem pretty happy. I mean, that's what I hear.

Well, I mean, I remember Satya's first day. I happened to be up there and we had like a half an hour together. And he said, what can you tell me about gaming? And I was like, dude, you shouldn't be in gaming. You're not a creative company. Like you should buy Workday or something, you know, like SAP. Like you're not, it's not a creative DNA company. And when he called to do the deal, I said the same thing to him, like, you know, you need us because you're not going to figure out gaming with what you have. But is this really the priority? And he said, you know, we really like this. And I can't tell you the other thing that I pitched him because it was confidential, but I had an idea that was a bigger idea and he didn't want to go for that. But he liked this idea. And 80 billion is still bite-sized. It's not even consequential to the financial. It's crazy. I always figured anything under 5% of your enterprise value is kind of a whiff and experiment. But you know what, I would have been okay with Meta. I would have been okay with Amazon. Like any place where there's talent, right? And I didn't think talent and a platform. Nice to be connected to a platform, and that goes without saying. But like talent to me was like something that was so important. And so, and I also like founders. You know, Satya is unusual as a CEO because he has founder mentality. And that's a very hard thing to find in a professional. Has teamwork mentality. Which is pretty different from I show. Yeah, it is very different. That's unlocked a ton of value for them. But I didn't think Amazon could get a deal done with this government. I didn't think Meta could get a deal done. I, you know, Apple's like, I knew that after Beats they would never buy another thing. And so yeah, Apple wants to be pay monopoly pricing, which is they're the monopolist and you're not. No, I think Microsoft's a great home. Yeah, I thought so too.

To me, it's like the essence of what you want in every employee that you hire. It's, and it's the hardest thing to test for. But I can't tell you, well, I can't tell you the actual full story, but there's a guy named Clarence Avant who was one of the, he was the CEO of Motown Records. Wow. Amazingly, amazingly capable executive. And I was hiring somebody that had worked for him. And I called him and I said, what do I need to know about this guy? Like, he knew he was leaving and he told me, too much Harvard, not enough Harlem. And like that's stuck with me since like the 1990s. But like that person didn't get hired. I hired him anyway and it did not work out. And it was exactly that. And I didn't really pay, like, you know, every time you get the regret of hiring somebody, it's usually like you had the warning sign up front. But like that's, it's the hardest thing to find and it's the hardest thing to test for is judgment and grit.