Acquired - CAA (with Michael Ovitz)

0:00I was watching you at Bill Murray at the 92nd Street Y. How great is Bill, right? He's like the worst interviewer ever, but he's hilarious. He's Bill Murray. We'll let you talk more than Bill did.

0:32The season finale of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund PSL Ventures. And I'm David Rosenthal and I'm an angel investor, based in San Francisco. And we are your hosts. He was the most powerful man in Hollywood for two decades.

0:57He is responsible for movies and TV shows you love, like Late Night with David Letterman, Jurassic Park, Back to the Future, Rainman, Goodfellas, and literally hundreds of others. We are here today with Michael Ovitz to tell the story of creative artist agency, CAA, the legendary talent agency he founded in 1975, that changed the power structure in Hollywood forever, and not just Hollywood.

1:22As many of you probably know from our earlier episode this season, Michael and CAA inspired none other than Mark and Dresan and Ben Horowitz to similarly change the power structure of Silicon Valley. Boy, did he ever? Oh, what a great way to end the season. I am so pumped. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired. Lagora!

1:47the agentic operating system that is redefining how the world's best legal teams work. Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus.

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2:28drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lugora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work, and this means that the pie can grow even as each individual task takes less time.

2:48And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

3:40Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at logora.com slash acquired and just tell them that Ben and David sent you. Listeners, before we dive in.

4:04Many of you already know this. A ton of you have already subscribed, but the LP show is now publicly available in all podcast players for free. So only the first two weeks of brand new episodes are in the private feed. Everything else, you can go search acquired LP show in the podcast player of your choice and get all those episodes. Now, without further ado, our conversation with Michael Ovitz. Michael, welcome to acquired.

4:32Thank you very much. It is so great to have you here with us. So we're thinking, of course, like any good creative artist, we're going to steal from your book and we're going to start in media's rest and then rewind just to set the stage for what's to come. Just don't ask me any hard questions. Well, I think you'll enjoy telling this story. Can you tell us the Jurassic Park story? You must be like me and like dinosaurs.

5:02Well, that was the key to all of it, right? Everybody likes dinosaurs. I think that's accurate. That's what got that movie made, basically. So you had a pre-existing relationship with Michael Crichton, but he hadn't produced any new material in a while. Is that right? So Michael was a client of mine starting in the late 70s. And we developed an extraordinarily close personal relationship that went way beyond.

5:31our professional relationship and I literally talked to him every day of the week and I did that not because he was a client partially because he was a friend but mostly because he was one of the smartest and most interesting people he was really like a Leonardo da Vinci type right he was amazing here's a guy who was a medical doctor screenwriter director travel writer short story writer novelist and just was probably the greatest guest ever have at a dinner party because he could talk about anything with an extraordinary depth of knowledge and It's fascinating to me because later we'll talk about another friend of mine who I

6:30Love putting together and that's Mark and Dresan the two of those guys Probably sucked 90% of the brain power that God gave away in their birth years They're just extraordinary, but Michael ran into a very tough patch really tough patch and a lot of writers and creative people And you've probably heard the expression writers block, you know, they Occasionally just it doesn't flow artists have it as well. I have a friend who's a phenomenal painter and she Just couldn't get it together for six months. It just wasn't coming out and I think that Michael was in a position Where he was going on a couple years and he just wasn't happy with what was coming to him and

7:30I used to have lunch with him once a week. And I would push him constantly at the lunches to try to see if I could ignite a small spark. And at one of the lunches when things seemed the bleakest, he said to me, what do you think of three people age younger and maybe one a little older person?

8:02stranded in an amusement park off the coast of South America, and the core of the amusement park are prehistoric animals. And I looked at it and I said, wow, my young son likes dinosaurs, I like dinosaurs, and my dad likes dinosaurs. This is really an extraordinarily interesting idea.

8:31And we then talked for almost three hours about paleontology. About, is it possible you could breed these type of beings in the 20th century? Could it be made real? Is it possible with, in those days, with the kind of technical know-how that was available in the 90s to do it?

9:01And we came to the conclusion that it was worth him sitting down and trying to write it and Lo and behold he sat down in five months later. He called me up. He said, I'm sending you a draft of a book about what we talked about. And he sent it over and I remember sitting down around six o'clock in the evening six thirty. I had something to eat.

9:29I had left the office early and I just started reading type written manuscript pages and I didn't finish until around three in the morning and I called him at 7 a.m. and I said this is the best thing you've written in ten years and I said I just couldn't stop turning the pages just as an aside one of the Great tests of whether something works or not is how quick you turn the page and you know from reading just Recreationally if you turn the page you like the book and I just devoured this book and I said them I said look this is brilliant It'll make an amazing book. It'll make an amazing movie and I said there's only one guy in my mind that can make this movie

10:28They're not two guys or three guys or four guys There's one guy and if we don't get them I would be worried about what this movie looked like and he said who and I said Stephen and in our world There are certain people that have single names. There's Madonna. There's share and there's Stephen Of course Stephen Spielberg who was also the one director who is not your client He was not my client and I wanted him to be a client very badly So my brain started to work on over time and basically I said Michael I'm in a call Stephen So at 9 a.m. I called Stephen. We talked and I said I've got something I want to send you and I know you don't read at night So I'm gonna call your wife Kate Capshaw and I'm gonna ask her permission for you

11:25To disappear tonight and read this is like a classic agent trick right is to Call somebody spouse I had no choice Because I had to create a sense of urgency around this But also I didn't want to oversell and I didn't want to undersell So he agreed he said caller I did she agreed sent him the book he said how much time do I have I said you've got today and tomorrow And lo and behold, the next morning at 7.30 in the morning, my phone rang. And it was Stephen. He said, this just knocked my socks off. He said, I couldn't believe this book. He said, I'm making this movie. And what year was this? So this was about a year before the movie was made. 91, 92. It's very unusual to begin this level of

12:20pre-production on a movie even before the book is published. I mean, this is on the first version of the manuscript, right? Yeah, this is highly unusual. What's even more unusual is I asked Stephen to commit to the movie subject to a budget. And we had no distributor and no financing. And Stephen was the most sought after director in the business. And to his credit, he said, okay. And I called His producer Kathy Kennedy who oddly her husband Frank Marshall was my college roommate Whoa no way, so I had a little credibility there Kathy runs Lucasfilm now, right or no credibility David depending on how you look at it and I said can we get a budget on this book? He said sure He said but do you have a script? I said no, so I sent him the book

13:21sent her the book, they both read it. We did a rough budget and Michael decided to write the script, subsequently brought in some help. And basically I went to Universal, which was where Stephen was housed. And I called the head of the company, Sid Scheinberg. And it was kind of a famous saying at the moment, but I said, Sid, we got good news and bad news.

13:52He said great. What's the good news? I said we've got a Michael Crichton book Michael Crichton screenplay Steven Spielberg's committed to direct Kathy Kennedy's gonna produce and I said and it's about dinosaurs which we all love It's three people trapped in an amusement park gone awry loaded with prehistoric animals and Sid of course is the number two day The Wasserman who were going to talk about it a minute. So Sid says, okay, that sounds amazing. What's the bad news? I said, the bad news is you don't own it and we do. And I said, so Stephen doesn't control it, which means your first look with him disappears, but Stephen wants to make the movie a universal. And he said, how much time do I have? I said 24 hours.

14:50And he asked what the deal was. I told him the deal that we were going to be partners with Universal Dollar for dollar and he got back to me about 12 hours later said we're in so this was all done under the tutelage of CA with Criton and Spielberg in Kennedy and Frank Marshall who helped us with the budget and it was one of the premiere packages we ever put together. And we're going to talk a lot more about packages and everything you pioneered. But in the old world, the old Hollywood, all these people would have been under contract with the studio and just paid employees, paid labor, which were asked to park one onto gross a billion dollars. It's actually if you had all of them together, it's much more than that. Wow. And your team, the creative team and CAA.

15:49kept 50% of that billion plus well the creative people at 50 which means we had five right because you had 10% Yeah, even though everyone Trited us saying we never took 10% but they were all wrong So is my math right then that Stephen had about 50% of that and Michael had about 50% of that so each of them ended up with a quarter billion dollars from this franchise I don't know what they ended up with. They didn't have an equal split. Okay. Steven had more because as a director you command more. But they both did very well. And as David brought up, if this was done under the old studio system, all of them would have been under contract to a different studio. And the odds of loaning them out were nil. And then the odds of getting this made.

16:44outside the system would have been almost impossible. Before we dive into this old system that David's gonna take us to here, I just wanna point out how unusual it is. I mean, you represented Michael and for years, you know, he's sitting there with writer's block and you're just getting lunch with him every week, like coaxing him along, trying to figure out what that next big thing is. Even though, you know, he's your client and you're spending all this time and attention, but the agency business model is to get 10% of what actors, directors, writers are creating. And if he's not creating anything, you're spending a ton of time with him as obviously client, friend and as your belief in his future that sort of made this all possible. Well, that's true. But I will say one thing about the agency business that is really not well known agents are depicted as money-grubbing as

17:43Not loyal, aggressive, short-sighted sometimes. But you know, the reality of it is, I don't know many agents like that. The agents that I dealt with at CA, the agents that I competed against, were vigorously and ferociously loyal to their clients. A lot of them were in the same position I was with Crichton.

18:10There is zero chance that I would have let that guy down none and I knew he was having a tough time and it was my job to be there for him period not a discussable issue not a choice Not an option. I had a be there and I will tell you I tried some hokey things To get them stimulated, you know, I brought them other people's ideas Sometimes I'd bring him an idea so bad to try to get a chuck a lot of them where he'd look at it, say, what are you thinking? And I said, well, I'm thinking that maybe you'll think this is so bad that you could do something just a little bit better. And frankly, the agency to their credit went around telling everyone that Crichton was working on an original. And by the way, that was unequivocally untrue.

19:09He was working on nothing. I mean, he could barely get out of bed in the morning. He was really wiped out. He felt he had just spent all his creative currency. So my job was to just back him up and stimulate him into thinking that he could do it again. You know, back when all these folks were under contract, I'm really, I mean, reading about Old Hollywood and learning how the old studio system worked.

19:38To me, it's like a sports league. There were five teams, the major studios and then a couple independence, a couple major minors. They were all a sports team that had the owners back in New York and had the GM and the manager. Those were the studio bosses and then all the actors, directors, writers, they were players. They were like LeBron James. They might be paid well, well, that's a bad example because the players make so much more money now, but it's like a NFL player in the 70s. Yeah, they played for the team and if they didn't go out and play, They would get suspended. I think that you could safely compare the studio system to today's NFL. And they had people that made a lot of money. They had artists that were getting in their time substantial sums of money. You know, the Douglas Fairbanks, the Mary Pickfords, then if you moved into the next era.

20:34the contract players, the Clark Gables, the Jimmy Stewart, the Kerry grants, they were paid in those days money that was unthinkable. Even for the folks where it was a large amount, it was committed up front, right? They didn't get a share of the proceeds until who was the first to really get a gross proceeds deal? Well, the first is the famous story.

21:03of the movie Winchester 73, where Lou went into the studio and suggested a lesser front money payment for a piece of the back end. Prior to that, artists were paid what's called flats, which is a flat fee. And they didn't get a basic participation. And I think that what he did is he changed the entire fabric of the business. And so that was Jimmy Stewart in Winchester 73 and Liu was his agent. Yes, was his agent, which is funny because then Liu went to the other side. And if you go all the way up to Jurassic Park, you know, he got stuck with participations, I had a similar issue with Liu.

22:00and sit over back to the future. Where they were running the studio and by this point in history, lose original trick of hey, let's get Jimmy Stewart cut in on the back end. He's a partner in this movie. He's going to participate from the upside. You would take what he did and what CAA really did was multiply that over and over and over again, such that the talent was really participating in the upside. So then by the time you bring Jurassic and you bring back to the future to Lou when he's a studio head at Universal, that's got to be kind of a wild, full turn of events to really get the better of that deal. Well, it was interesting. One of the things I said to Lou when our director, Bob Zemeckis, who's a brilliant director.

22:48Was going back for back to the future two and three and I wanted a larger participation for him My opening line to Lou was you caused this problem I Didn't go over very well Who was Lou cuz from the outside perspective like here's how I sort of see things Lou Was an agent he was like Anakin Skywalker, right like he was like fighting for the artist to get Way more of the upside. But then he went to the dark side and he stopped being an agent and MCA, his agency bought Universal and all of a sudden he's on the other side of the table as a studio boss now from your perspective trying to stiff the artist. How did this happen? He made a decision, first he bought the pre-1948 Paramount Library for Universal and he made a decision basically that it was better economics on the other side of the deal.

23:45Why take 10% when you can have 90? First, he bought reviewed television. Then he bought Universal. For a period by the way, Lou was still an agent while he owned review television. Oh my goodness. So he had the ultimate monopoly. He's on both sides of the transaction. Yeah. You know, I've always felt and I still do. I'm really interested in dealing with conflicted people because If you have a conflict, in essence, you want it to work out on both sides. So a lot of times I'll go to someone with a heavy conflict to this day to work out a problem. I'm thinking of Lew and MCA as sort of opening up a seam for artists, but then closing it again, but maybe that's not totally accurate. How would you characterize Lew then and what he did with Universal?

24:45They gave participations out. They didn't stop it. They negotiated hard and tough on their side. No different than we did on our side. But they were sympathetic too. They didn't just say, look, we're not doing this. We're reversing it all. And frankly, as CA gained momentum in the 80s and early 90s, they didn't have a lot of choice because of the 50 top grossing directors. For example, in 90, CA represented like 45 of them. So, it was impossible. You couldn't say no. I remember when we signed Mike Nichols, may he rest in peace, a great director. I'll never forget a call he made to me. He was getting 2.5 million to direct. And when he became a client of ours,

25:45We went to make a deal for him. I called him up and I got him five million And he said I don't understand that's not my price And I said well it is in the context of being a CA client Because five million was what the top directors made at that point in time So I said Mike you're a top director. I said if you want I'm happy to take two and a half of it and donate it to charity At the time I was raising money for the UCLA Hospital, we were gonna rebuild it. So I said I'll be very happy to take that two and a half million for the hospital. And he said I'd love to do that, but I'm very pleased to have the full amount. Did he make a donation to the hospital at least? He did. He made a small donation. It was not two and a half million, but he was very generous. He was a great man.

26:43And a great director. All right, so let's go back to this era before you got into the business here. You mentioned Lou bought this pre-1948 catalog, which was a genius move because you could then run these films on television, which was rapidly sort of proliferating around the US and make all this money on owning the rights to this catalog that are playing. Meanwhile, MCA buys Universal, so you have one company there that's both an agency and a studio. Well, Washington DC of course doesn't like this and they use the same word that you did, which was monopoly. So the hammer comes down and my understanding is MCA couldn't function as an agency anymore, right? That MCA universal turned into a pure studio. Let me give you a sidebar rumor. Oh, that most of us that were in the business would bet on as a fact. Lou was the chief fundraiser for the Democratic Party in West LA. There are

27:41Stories galore that Lou called one of the Kennedy brothers and suggested that MCA be broken up as a monopoly Why would he do that? Well, it was really if it's true it makes a lot of sense because it's brilliant Because what Lou didn't want was MCA to stay together as an agency and leverage him at Universal So by breaking up MCA that whole company went into a group of tiny agencies None of which could give him a problem until we came along We were his worst nightmare because we created MCA on steroids and We would never sell any idea or client unpackaged or naked to a studio ever ever. So anything we did was pre-packaged where we controlled all the elements and our clients controlled their own destiny. By controlled all the elements, you mean the script, the director, the stars, everything. It was in our client's best interest for us to go with a package to negotiate because the counter party

29:08They had no choice. So we could dictate terms. So frankly, we legally set prices, even though you're not supposed to price that we basically did it because you owned the scarce commodity, which was the complete package and no one else had access to that. And then you would just go sell that one package. That's right. So if you had stripes or ghost busters or Gandhi or Twins or kindergarten cop or any of the 350 films that we packaged Tutsi Rainman and go down a forever list You had a choice you'd buy the package or we sell it to somebody else because We viewed the studios as distribution entities period

30:07We didn't need them to tell our clients how to make the films. Now we did need them to distribute in market, they were great at that. We never sold a single piece of material on its own, ever. It all came wrapped up.

30:26with elements. Where did that insight come from because I know in the sort of pre-CAA studio world, you know, the talent agencies would represent the talent and then the studios would do development, you know, they would buy the script and they would attach a director and they would turn it into a film and then they would go cast the actors. How did you sort of get the idea of oh, we could do that. Well, the idea was pretty simple, frankly.

30:55In that when we started in 74, we didn't have any clients. So all we had were relationships. So all we could do is put elements together and try to attach ourselves and hang on to a booking bronco. And by doing that, and if we could hang on, it developed that as we took clients in, we'd surround them with elements.

31:24Because it became very clear to us that clients were the creative force, and they were the ones that were going to dictate what was going to happen. It was kind of the same reason that I encouraged every one of the agency to read a lot of magazines. Now, you can't think of magazines today the way we did, because in the 70s, 80s, 90s, and early 2000, magazines were vital part of the culture of the country. They were the internet. It's correct pre-internet. My thesis was that art directors of magazines and editors were always six months ahead. They had to be because it took three months to get a magazine out on a month to let it sit on a newsstand. So they had to think six months in advance.

32:23So I urged everyone at the agency to read, we had a list of 100 titles that they needed to look through every month. I subscribed to 200 magazines. And I didn't read them all, but I would sit and thumb through them while I was on the phone. So, you know, I would read things like golf digest.

32:50Motor-trend automobile car and driver. Why did I read those? Well, I'll tell you why. When I met Paul Newman, I actually had something to talk to him about because Paul Newman loved cars. Now, could I talk for days? No, but I had enough to get through an hour. So whatever we read, current events.

33:18You know, we read women's magazines like McCalls and Red Book and Vogue and Marie Claire. Why did we look at these? Want to see what fashion looked like. If you want to talk to an actress, you're going to have some insight into look and feel and what people are thinking. It doesn't mean it was always right, but it gave us a firm overview of editorial process.

33:47by people whose job it was was to predict the future. You're in the business of being able to relate to people and quickly build strong trusted relationships. And also get a sense of where culture is going. You know, we got the account to do all the advertising for Coca-Cola because we were really culture mavens. We really had a sense.

34:19Of what the audiences wanted to see and before we did this there was this kind of unwritten rule that only buyers could do that You know studio executives network executives and my thesis was I had a partner named Bill Haver who was head of our television apartment He was one of your founding partners, right? Yeah, Bill Haver could read a screenplay a teleplay and give as good a notes as any executive at any television company. As a matter of fact, I could probably make an argument. He could probably do it better. He was really good at it. We put together Shogun. As a mini-series, everyone said, Bill and I were crazy that we'd lost our minds. Who cares about the Far East? And how do you make a TV series about a bunch of Asians and one in Anglo? Well...

35:16It was our point of view from everything we were reading that Asia was becoming a very hot commodity in the 70s and 80s. People were really interested in what was going on, the rise of electronics and electronic companies like Sony and Matsushita, Panasonic, National. These were major players in our business developing hardware.

35:44For all of the software that our clients were creating and those are the kinds of things we would think about but moving back to Coca-Cola We weren't in the ad business, but we had a sense of what people wanted to watch so I was at a Alan and company conference and Herbalon was on the board of Coca-Cola and of course the CEO and president of Coke were at the conference and We're having a coffee out on Herb's porch. And the both guys said to me, we're getting hurt by Pepsi Cola. And bear in mind in the 80s and 90s, there was a book written called The Cola Wars, where these guys were fighting like cats and dogs for market share. We talked about all this on air.

36:42Berkshire series. This is, of course, Roberto Guizetta and Don Quillo that you were talking with, right? Yeah. So I said to Don Quillo and Roberto Guizetta, look, I think you guys are making a mistake with your advertising. And they said, why? And I said, well, you're doing six or seven commercials a year. I said, how do you run the same commercial on Seinfeld that you run on daytime and that you run on?

37:10You know late night I said they're all different demographics. What are you doing? They said wow, that's interesting said could you come to Atlanta with some of your people? I said yeah, if you send a plane for us Hey Coca-Cola historically is one of the most sought after Advertising accounts in America. I mean McCann Ericsson, you know had this account had it on lock for decades and decades and decades they sell a pure commodity product that's differentiated by brand They pour a ton of money into brand advertising. Yeah, they were running a business that spent five to six hundred million a year on advertising worldwide. So I gathered 10 of our agents. And I took them from different demographics and different departments. I had men. I had women. I had music agents, film agents, TV agents. I had a personal appearance agent. I had a book agent.

38:10They did send the airplane and we flew to Atlanta and they brought in all 12 of their worldwide geographic division heads. They got them all there for an all-day meeting. What are your staff think? Would you tell them like, hey, we're gonna go do an ad pitch to Coca-Cola. Well, I'll tell you what they thought. Most of them thought I'd take and leave of my senses. How could we be in the advertising business?

38:42and a couple of them looked at me and said, wow, we can do this. Why can't we do it? But my point of view, 80% of our company thought there was something wrong with me that I probably had food poisoning or something that went to my head because it just didn't seem to equate to them. But to me it did because what do we do?

39:10Read material and try to tell a client like Michael Crichton and Steven Spielberg. Do you make a movie about dinosaurs? Can we recommend that to Dustin Hoffman? Can you make a movie? We think you should make a movie about an autistic guy and Tom Cruise should be your brother We took the same positions that a buyer took No one owns creative thought or opinion Look you two guys look at something on TV tonight You have an opinion about it. When you're right more than you're wrong, that opinion's a trusted opinion. And we were right more than we were wrong collectively as a group. So we flew to Atlanta. We sat. We looked at every single commercial they had ever done. We listened to the complaints of the department heads geographically. And I said to them, give us 90 days and we'll be back to you.

40:10And I knew it would take us two weeks, because I already had the idea that I thought was gonna work. But I never liked to over-promise and under-deliver. I like to under-promise and over-deliver. So about two weeks later, I called Don Kio. I said, we're coming back to Atlanta. You're gonna pitch your idea. He said, you said you needed three months. I said, well, We kind of accelerated it. We got so excited and we drank a lot of Coca-Cola. You're good. Which cracked them up. So we flew in three weeks to the day after we met the first time and we pitched a simple idea. We said, look for the same money you're spending. We're going to do 30 to 40 commercials a year. They're all going to be for different demographics. It'll cost you the same as your seven commercials.

41:09We're gonna do a mascot for you Polar bears turned out to be the polar bears Still running 25 years later. We are going to Run your commercials like a relay race So first of the year we're gonna do a hopefulness February we're gonna go into Valentine's Day and love Easter family summer refreshment fall back to school Thanksgiving family, again, Christmas, polar bears. And they said, how do we know that's going to work? And I said, you don't because we didn't. They didn't. We just said, we believe it. Let us try one flight of commercials. And they said, how many do you want to do? I said 40. And they said, you're crazy. But if you want to do 40 for the seven,

42:07the budget for seven, you got it. So they asked us, then they called back and backtrack. Because McCann had been their agency for 40 years. And they said, well, you come do what's called a shootout. And I shoot out is where you come in and all the ad agencies pitch to the executives. And I said, we will do a shootout if Don and Roberto attend.

42:37The CFO Doug Ivester attends because he is the keeper of the money Your head a marketing Peter Celia tens and three or four your other key executives attend and We'll do it and they said okay, and they set the date Was set. I'll never forget this for 11 o'clock on a weekday That I flew our team of five people in the night before we checked out the room. We were gonna do it in We rehearsed what we were gonna pitch and we went for a very nice dinner. I bought everybody new our money clothes and We got up the next morning. Never forget this we went to the gym We had a nice breakfast and we walked in at a quarter to eleven and sat down and we looked the part one would say it's a show of strength and at five to eleven

43:35The McCann people there were 35 of them Drifted in having just gotten off a 6am flight from New York And I'll tell you they looked like they were all in a blender They kind of looked like live smoothies They were wrinkled and ratty and all screwed up and nice people too, but Whoever said to them to fly in the morning made a critical error Anyways, they flipped a coin and they said they won And we were hopeful that they would say what we thought they would, which is they'd go second. Because we wanted to go first and blow their doors off. Of course. And we did. They won and they said, we'll go second. And I said, great, we'll go first. And we went in and we presented 35 ideas.

44:35And we acted them all out. And each one ran 30 seconds. And we did it crisp and clean with music, with expression, with enthusiasm. I started it. A guy who just passed away named Len Fink and Shelley Hockron, who worked with us, went in and helped us. Len, I remember, did a commercial about a dog and he barked like a dog. He got on the ground. And we had these guys.

45:05And I will never forget I was sitting next to Bill Haber, but next to me was John Dooner from McCann Erickson and then a guy who had been friends with Don Keele for 35 years. They were drinking buddies. And this guy wrote Dooner a note. And I saw it by accident and it said, we're screwed. And sure enough, we finished.

45:34And then they came up. They were so bad that after seven or eight minutes of presentation, they sat down. We got awarded the account. And of the 35 commercials we presented, they approved every single one. Wow. And these commercials, am I understanding right that coming into this, you know, you didn't have big name actors wanting to do commercials. You didn't have movie caliber directors doing commercials.

46:03But one of your aces in the hole was not only are we going to cope with these great concepts, but we're going to go get our A-list CAA talent to do this. And we did. We got a lot of our top directors who were between movies to do the commercials, paid them well. They made money. You made money. Coke did great. Everybody was happy. But more importantly, you know, it's funny. Our competitors put out all this press. CAA is going to Use their clients to make commercials house stupid blah blah blah. I'll never forget one of our clients Dick Donner who did Superman called me up laughing He said I just read this article in variety that we're all stupid for doing these he said I just cashed my check He says I'm between movies. I couldn't be happy or I just want you to know that We thought out of the box nobody else did and when we

47:03Did the commercials I said to Roberto? I want you to premiere them like a movie invite the press and Run them all because 35 30 second commercials is less than 20 minutes and he ran them for the press and The press we got was insane. We got to cover a time magazine which was important at the time We got a love letter in the New York Times We got unbelievable press except for the advertising journals shocking who said we were robber barons. I'm shocked. Yeah, we were ruining the business. But here's the factoid that is fascinating. This is prior to people knowing the word or its meaning outsourcing. Mechan Ericsson had 300 human beings.

47:59working on the coke account. We had six. And we edited everything. We just didn't make them. But we hired a company called Rhythm and Hughes to do the animation. They weren't on our payroll. But they did a great job. Right. Those polar bears cost a lot less than Tom Cruise. Let's put it that way. The polar bears we did very reasonably. And we delivered.

48:2535 commercials for the cost of seven one quick sidebar then we'll move on We sent the bills to the CFO who was a friend of mine at the time named Doug Ivester and We sent a bill for a commercial called timeline that we made on an Apple two-E computer in black and white and it just showed the timeline of Coca-Cola at various times in history and we sent a bill I think for as I recall for like $35,000 for a 30 second spot. And that was probably more than it actually really cost on that computer. So they sent us a check for three and a half million dollars. And I called up and said, what is the three and a half million for us? It's a bonus. He said, no, we thought you made a mistake on the invoice. No one's ever done a commercial for us.

49:26for anything less than three and a half million. So we just we didn't want you to run out of money because we were a little shop. And I said, Doug, I hate to tell you this. I'm not going to cash the check, but it was 35 grand for the commercial. He said, I can't believe you did that. That's the kind of stuff we did. That's wild. So we're talking about this point in history where you would already become this big successful agency. You were already representing these people branching out into things like trying to take on Coke's advertising. Can we hear the entrepreneurial story from you of how CAA came to be in the first place? Because you really started with nothing like zero. It's actually pretty simple. I'll try to give you the highlights. A group of us, there were probably 15 young agents at William Morris, maybe 20, all in our 20s.

50:22and I was the assistant to the president of the time. Bill Haber ran the TV talent department. Ron Meyer was a first class talent agent. Roland was a, and Mike Rosenfeld worked TV packaging agents. And basically, we noticed a disagreement philosophically with where they were taking the business. And crazy as it sounds, C.A. was born out of a bad staff meeting at William Morris, where the guy worked for, who was head of the television department, his name was Sam Weisbord, announced with great pride and passion that he had signed Anne Miller, which will mean nothing to you two young guys, but she was a 50s song and dance queen and a Broadway star.

51:19We said in a staff meeting, we all sat in the back. We weren't allowed to sit at the table because we weren't senior enough. And one of us got up and said, Look, Ann Miller is a talented lady, but we should be signing Bob Redford and Paul Newman and Dustin Hoffman and Sean Connery and Sydney Poitier and we should be signing those people, not Ann Miller. This is William Morris.

51:50We've been around since 1898. We're on the wrong track. Well, the older guys went ballistic. You then saw a division at William Morris that never healed. And then they made a cardinal tactical error. The head of the training department that trained all of us was the former roommate of the president, Sam Wiespert, his name was Phil Welman. And he was a tough ex-Marine drill sergeant.

52:19and he trained everybody. And bottom line, they fired him. And he called us down. He was almost in tears. This was a guy that used to get up on the top of his desk, screaming at us at the top of his lungs. This was before people were woke. You know, this was like we were trained the old fashioned way. And we felt, my God, we were embarrassed.

52:49It was debilitating to watch this. This guy was destroyed. That was the beginning of the end. We started talking all of us. Narrowed it down to five people that we wanted to be in business together. And we made a decision to leave and set up our own business and do it our way. That's it. No more or no less complicated than that. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta.

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55:01To my mind looking from the outside at you all in the beginning of CA and then everything it would become no doubt a Absolutely essential and probably the primary ingredient was just all of your collectively and you personally just you're like raw Ambition certainly hidden lots has been written about that I'm wondering though, too is it also fair to say that your background because most if not all of you came from television Was that kind of a secret weapon because packaging was more common in television a and B television was still relatively new imagining most of the old people at WMA and and then also in the studio business just weren't tuned into this new world right. No actually if it's a good question but let me correct something William Morris was the top television packaging agency. And we all knew how to package television is very different than packaging movies.

56:00Because in television the producer is a key element and in movies it's the director and the director actor and actors are cast in television prior to the 80s when fading movie stars were brought into television But the thing about William Morris is they bifurcated TV and movies at a time when they were starting to come together and that was a thesis that we didn't agree with so that helped us leave but It was a different business at the time and William Morris wanted to keep them separate and we were asking the head of William Morris picture department and television partner run joint meetings because people could work in both areas and they refused to do it. That was another nail in their coffin. So when we started, we made a conscious decision to be TV only because by

56:58Saga rules they had to pay every Thursday and we started our business on a hundred thousand dollars And we never went in to debt beyond that paid that debt off in six months and never carried ten cents a debt ever and the reason we didn't as our TV clients got paid every Thursday So we took our commission but in 1978 we made a decision that we needed to be in the movie business and the only way we could do that was to dedicate agents to the movie business. So we made a decision that I would start the movie business in 79. And the rest of the guys would stay in television, but that Mike Rosenfeld, who was in the movie division way more with me would start a movie division at C.A. That's a great insight because you could cash flow the business if your customers, your clients were getting paid every week, but it's pretty hard to run a business when you have no

57:57You haven't raised any money if you're waiting one, two, three years for film projects to come together and then get paid on the back end after it gets made. Correct. Can I ask what was it like to get your first big star and what's the story of CAA sort of actually building a sort of reputable and viable talent roster? So there was a lawyer in Century City named Gary Handler and we moved into Century City very early on.

58:28And I noticed his name on the placard in the lobby. Did a little homework and discovered that he quietly had a tax practice and he represented every major movie star in the business. So I decided to sign him as a client. You signed the lawyer. A tax lawyer. Yep. He was going to be my client. So I went up knocked on his door, introduced myself.

58:59Learned everything that I could about him and then proceeded to become close friends with him and he delivered Sean Connery to me Wow amazing and I will never forget talking to Sean 1979 I grew up on bond. I Remember a call being said. I didn't have a clue what to say to him and I was struggling for words, but I should have gotten Academy Award for Best Actor for that call. Because I actually sounded like I knew what I was talking about, but I didn't. But I learned, I learned on the job. I'm sure Sean's not a dumb guy and he'd been in the business forever at that. Why'd he go with you? Like, there must have been some rational reason for doing that. He went with us for only one reason. Gary Hemler told them we were young, aggressive.

59:57Hot and had good taste. And Gary Hamler proved to be right. We did an amazing job for Connery. He had come off three really low grossing, not so good movies. And we turned his career upside down. But after him, Dustin Hoffman signed with us and just one after the other. I will tell you a funny story.

1:00:28There was a literary agency top literary agency name Adams Ray and Rosenberg. They had about 400 of the greatest writers in television, few feature writers, but mostly TV. And Rick Ray was best friends with Mike Rosenfeld, one of our partners. And Mike was desperate to merge with them. And I said, I'm happy to entertain it. So we had this meeting with the three Adams Ray Rosenberg partners.

1:00:58Sam Adams, Rick Ray, and I think his name is Lee Rosenberg. And the five of us, and we sat in a little conference room in our crummy little Beverly Hills office, which by the way was rated by SAG because the people that we leased it from were running a house of ill repute out of it. And the screen actor's guild was going to yank our license, little did we know. Whoa.

1:01:24So we got out of that mess, and we are sitting in the conference room, and I will never forget this. Rosenberg said, you know, we're going to have the best television agency in history, because we're never going to sign Robert Redford or Dustin Hoffman or any of these people. And this was before we signed Sean Connery. And Ron Meyer and I looked at each other and Mike Roosevelt, we looked at them and I said, well, that's not true. We're going to sign all those people.

1:01:56and they said, you're nuts. You're not going to sign any of them. So I said, well, we plan on signing every single one of them because we want them monopoly on talent to give us leverage to turn the paradigm around against the distributors. And they said, that'll never happen. I said, thank you meetings over. We're never going to merge. And about six months later, we signed Connery and then every week, we signed a famous movie star after that.

1:02:26And didn't you take out an ad in variety announcing it? Yeah, thanks for reminding me Ben. We took out these giant red ads in variety every Friday and the Hollywood Reporter on Monday. And it said CAA is pleased to announce the worldwide representation of Robert Redford, Sean Connery, Dustin Hoffman, Sidney Boatier. And we just went on and on. And every time we ran an ad I ripped one out of the Variety folded up and mailed at Adams Ray in Rosenberg And it got to be a stale joke after a couple of years Well, this feels like a huge principle of yours and CAA which was really strength leads to strength It seems like you were always looking around and identifying what's the new way that we've become more valuable and how do we leverage that into the next thing? Can you talk about that and some of the other ways that you just

1:03:24By sheer force of will or by counter position against other agencies how you were able to be different than everyone else around you and when Well, we were different for one solid basic reason Which is that we basically worked as a team So if the two of you were clients of ours You didn't have one agent what we resented at William Morris is it one agent coveted one client and you couldn't go anywhere with that because human nature is such that eventually there's a relationship problem. It just is. The longer you're around someone, the more there's a relationship problem. So we went ahead and put teams on people. We had some clients that burned through three, four, five agents, but they never left us. As a matter of fact,

1:04:24In a 25-year period, I think we lost under five or six clients. We never lost clients because we had teams of people on them that they could relate to. No actor ever had a literary agent. We'd have a literary agent on an actor. Well, why would we do that? Well, it would be stupid not to. Why wouldn't we? What does an actor do? All they do is read scripts to see what they want to do. What does a literary agent do? All they do is read scripts.

1:04:54to see what actors roles are available. So we were in a state of shock that actors didn't have literary agents when we looked into it. We were saying, wow, are we stupid? Or is everyone else stupid? I mean, obviously you all were young and aggressive and willing to think differently. But why was the competition so weak? I don't think they were weak. I think they were very comfortable in the old shoes.

1:05:25They liked the one-on-one. They coveted representation. Their meal ticket was their individual clients. At CA, your meal ticket was how well the whole company did. If the company didn't do well as a group, every individual suffered. Who owned these competitors? Like you said, you know, when CAA did well, y'all did well. Like it was a partnership. How were economic structures at other agencies?

1:05:55They just made what they called market deals. So if you wanted to hire an agent, you try to pay them whatever they asked that was a market deal. And we did just the opposite. We paid very small front money and said at the end of the year, if we do great, we're going to overpay you. We're going to pay him more than you can get elsewhere. You know, we had an agent who was co-head of our movie department get offered a job.

1:06:24by Jeff Bergen, ICM, who was a very good agent. And Jeff invited him to a meeting and the guy came in to see me. And he said, what should I do? I'm just going to turn it down. I said, absolutely not. Go take the meeting. Now, I had two things in my head when I told him that. One, I wanted to know what they were going to be doing and what they're...

1:06:50Thought process was going forward and I knew that he'd get that out of them but two I knew they'd under offer him and I wanted him to see what he could get elsewhere and I didn't tell that to him so he went and took the meeting and they were having a jolly time until it came to comp and I had instructed our guide ask for what he'd get paid so the answer came I'm gonna pay you more than I'm making. So the question is what are you making? And so Jeff said I'm gonna pay it like you know a million a year or something. And the guy who took the meeting looked at him and said that's very generous, but I'd have to be taking a 75% haircut to do that. And that worked for me at every level. One, it was good for my guy to hear what he was worth at a competitor.

1:07:51two, I love the competitor knowing that a guy way beneath his station is making four times what he's making. And three, it created a loyalty factor for me. And why were you able to just make so much at CAA and frankly just overpay to keep people there? Like what was it structurally about CAA where you were able to just run this incredible cash flowing business?

1:08:20Well, first of all, we were accused constantly of taking cut commissions. And finally, people realized we couldn't be paying what we're paying to people. If we were cutting commissions, secondly, we had a monopoly on the high end TV and film business. So we were minting money and we just paid it out to our executives period. And as you're talking about all this, Of course a team oriented approach makes more sense than this individual loan wolf thing, but there are tradeoffs involved in every decision and the tradeoff involved in showing up to every meeting with five people and having a network of people surrounding every client is that you need just way more communication and way more structure and way more systems.

1:09:11What are some of the examples of the things that you put in place to actually make this work? Because I'm imagining you probably talked to like 50 people a day for 15 years. Well, you're off by about a factor of five. So an average agent in our place would run 200 to 250 phone calls a day. Some were 15 or 20 seconds. So you got to bifurcate this into pre-internet and post-internet.

1:09:41So pre-email, we had a system that we developed that was failsafe. One, return all internal clients. First, two, you don't go home at night without returning every call. And three, we had what's called a buck slip system, which was everyone had buck slips, which were these pieces of kind of heavy paper that had your name on it. And you'd write a note to an associate.

1:10:10And I would say Ben spoke to Scorsese, recommended good fellows. Call me if questions. That would get sent from my office to that person's office, to your office, in real time. It was our form of email. Then he had to answer me that he had read it. So he'd strike it out and answer it.

1:10:40Send it right back to me. So when Scorsese called him, which he did, he'd say fantastic, Marty. I heard that Michael talked about good fellows couldn't be happier about the decision. And then Marty goes, wow, these guys are on their business. Is there an archive of all these somewhere? No, they're all trashed. Oddly, we locked up our trash every night just so you know, Because we found someone going through our trash, and that was really scared me to death if you want to know the truth. This adds some color as to why the mail room was so important. When people say it started in the mail room at CAA, you were an essential part of the fabric of the system. Well, the mail room at our place was a fast track to a career. If you could make it through the mail room, and the way we handed down clients,

1:11:39So if you guys were agents with us, and if we signed a giant star, we brought you in as part of the team. And if you were good, you made your own relationship. Well, that's the benefit of the team approach too, right? Is you could go out and sign. I don't know. XYZ, let's say Scorsese, but then you could bring Ben and me in. And then that probably let you go sign a lot more Scorsese, right?

1:12:08Well, David, time was our enemy. So I needed a way to loosen myself up. So how would I do that? Well, I'd have people behind me working with clients that I signed. So we signed Hoffman, Pacino, and De Niro, which had never been done in history. And they're known as leading men at the time, right? They were sort of competing leading men. Well, my thesis was they weren't competing if they were with us.

1:12:37I said to Dustin Hoffman, help me get De Niro. He said, why? I said, because wouldn't your rather I told you what he's doing? Then me not knowing. He said, wow, that makes sense. So we got De Niro, you know? And then when I got both of them, I said to both of them, I want to sign out. And of course they looked at me. What are you crazy?

1:13:04You got the tool of us and I said no, I'm not you can work with each other and on top of it We'll all know everything and you're not really competing because at the end of the day the director makes the decision the agent doesn't make a decision But we packaged De Niro and Pacino with Michael man called it heat. Yeah, you build all this up and then you make the pie bigger for everybody by packaging Well, that would have never happened would have never happened In Untouchables, they would have never gotten Costner and Connery in the same, and Andy Garcia in the same movie. They were all clients of ours. And we wanted them to work together. We were a very family-oriented business. We wanted our clients to work together. And it worked for us economically and it worked for them. You took an aspect that people thought was a zero-sum game.

1:14:02and you made it a positive some game. Our job was to create product for our clients. Period. We had people dedicated that had no clients that were only involved in creating product. That was their job. No agency did that. We also had 15 readers on staff. Michael, can you take us toward the last few years of your time at CAA. You know, we talked about this period where you're signing your first clients. You went on to represent 45 of the top 50 in Hollywood, talked about, you know, your foray into advertising with Coca-Cola. There's sort of two little pieces of this chapter remaining. One is you kind of getting into investment banking. And maybe I should pull kind of there. You definitely turn CAA into an investment bank. And I think you were the top grossing investment banker in the world.

1:15:00the year that you did your first deal. And then the second I want to talk about when you explored Universal and potentially becoming a studio head yourself. So the first was a natural evolution of what we were doing. The studios were in trouble financially. And it became very clear to me that they were going to need financing and traditional financing wasn't going to work. Universal was under siege.

1:15:31people were taking stock positions corporate raiders out of New York Columbia was in trouble MGM was in trouble Warner's believed or not was in trouble So I was very friendly with a brilliant guy named Herbert Allen and Herbert was an investment banker taught me a lot about the business. We used to spend a ton of time together and I got this idea that we could bring financing To save our marketplace because frankly if any of those companies went out of business so did we I Couldn't afford for universal or Columbia or MGM or Warner's to shut down or to reduce the scope of their budgets CAA couldn't put up a hundred million dollar budget for a movie you need to the studio to finance it Well as worse than that then we weren't allowed to produce ah I had a white paper written by a

1:16:31the most prominent entertainment lawyer in the business at the time, Frank Rothman, who has passed away, a great guy. And Adam, he wrote a 10-page opinion that we couldn't produce. Because I wanted to go into that business with our directors and create a director's company. But we didn't want to take on the guilds. Plus, the writer's guild and director's guild were run by CA clients. Right, you'd be pissing off here, clients. And we were settling strikes Bill Haber and I settled one of the writers' strikes in the 80s. We couldn't afford that. So back to the studios being a financial trouble. Literally you have the reverse problem of the Wasserman back in the day of, you now have the power on the cell side. You need fragmented buyers. I needed people that are buyers with money, period. So I started building relationships in Japan. First relationship I built.

1:17:30was with a division of Matsusha Electric and I hoped that I would Be good enough in the meeting that they division would recommend to Matsusha that they meet with me, but before I got to that I was representing people That were involved with Sony and I got involved in the sale of CBS records to Sony and built a relationship with Noria Oga, who was the number two at Sony, who ultimately introduced me to Achao, Marita. And I became Marita's and Oga's consultant. We consulted on the sale of CBS records. And then Mr. Marita came to see me and wanted to buy get into owning content because he was upset that Betamax, which was a superior technology to VHS, was losing to VHS. He won Dona Studio. So I started calling different entities that I thought made sense and brought Maria into meetings. And the first entity I called was Kirk Kirkorian who owned MGM.

1:19:01and I had a meeting at my home one morning, late morning, pre-lunch with Akiyomorita, Kirk Kirkorian and myself to discuss selling MGM to Sony. And Mr. Morita was a very clever guy and we were a great team. He came with a box and he stuck it in the middle of the table and Kirk couldn't get his eye off that box.

1:19:30and halfway into the meeting, Morita opened the box and he pulled it out and it was a tiny little video camera which was a prototype for a video tape recorder camera and Kirk was blown away by the fact that when Morita would take video of us in the room with natural light and play it back through our TV set Kirk went nuts It's the equivalent of Steve Jobs putting an iPhone on the table in 2005. So Morita just kept talking and then Kirk said, how do you want to pay for this? And Morita said, you know, we would finance it through Sony and we have the cash. And then as the meeting ended, I could see that Kirk

1:20:26was lusting after this camera. Maria packed it up, put it under his arm and left. Power move. And that was how we ended the meeting. Subsequently, I couldn't get traction with Kirk. So, Herb and I started working on Columbia, which Coca-Cola owned. And the rest is history. We worked the deal and through a long process.

1:20:54arranged to sell Columbia and Tristar to Sony. And that became Sony Pictures Entertainment? Yes. And Herb and I did that deal with no one else, just the two of us. And it became a template that he and I then did over and over again. What do the economics look like when you arrange a deal of that magnitude?

1:21:18Do you agree upfront to a fee? Do you say, hey, let's figure it out later. Do you agree to a fixed price? So I did something in those days that cannot be done today. And let's bear in mind guys, this is 35 years ago. I worked my tail off to understand Japanese culture. And I read everything that was published. I studied the language I studied.

1:21:46The culture I studied, the art I studied, how they treated people. I read everything under the sun that wasn't tacked down. There was a Japanese American bookstore and rock center. I was their biggest customer. I love it. And I took a shot at something which paid off for me in multiples. So all of the banks excluding Allen & Company.

1:22:17And me asked for a fee letter up front. We asked for nothing. We said, look, if we do a good job, you can pay us an obscene sum of money. If we do a bad job, pay us our expenses and we're all good. You didn't specify what the obscene sum of money was. Now, I remember in a meeting at Matsushita in Hawaii, they said, what feed do you want?

1:22:47I said, if I'm not successful, I just want my expenses. If I'm successful, I want you to load up a brinkstruck and back it up to my house. They got the picture by saying that we're saying, look, we want to exceed all fees ever paid, but we never put a number on the table. Do you know, I never once had a discussion with any of them about money, and I was paid for handsomely by everybody.

1:23:15Okay, we gotta know, what is the Brink's truck end up looking like for the Sony deal and then for later the Matsusha deal? I don't remember exactly what I got paid on the Sony deal but I got paid twice because I got paid for the record deal and then for the studio deal. On the Matsusha deal, they gave me $120 million to pass out to all of the consultants and I passed out money to everybody generously because we had Washington lobbyists, we had PR people at Alan and company and this is to buy universal yeah was to buy MCA universal which by the way I tried to buy for Sony but Lou turned me down Said he'd never sell to the Japanese But when his stock went from 65 to 20 he changed his tune

1:24:09And so Matsushta is the parent company of Panasonic. Is that right? The brand that Americans would know and they ended up owning Universal for Was it 10 years before it sold to Seagrams then Vivendi then NBC? They had a very bad experience with Universal hmm So when I brought the CEO of Matsushta to the Universal lot After the deal was consummated I had had lunch with Lou the day before. And I said to him, I said, Lou, you are the greatest executive in our business. But once you sell this company, they're paying me to consult. And I want you to feel free to use me because I understand their mentality and their culture. And I said, with all due respect, you don't. And I said, I'm here for you. And a very apocryphal thing happened when I

1:25:09Brought these guys to the gate. I dropped them off and Lou looked at me shook their hands and turned his back on me and didn't invite me in And that was the beginning of the end for him because he didn't understand them and They couldn't communicate with him. He didn't understand how to deal with them and four or five years afterwards they called up And his contract was up and he and Sid ran Universal like they didn't have owners But they did and they're smart guys, but they couldn't make the transition and they didn't make the transition Well clearly I mean having read about him and even going back to the Sony courtship Clearly Lewin said didn't want to be owned They didn't want to be owned. They took the deal out of fear of losing the company

1:26:11The value of the universal real estate was probably 18 bucks a share and their stock was going down to 20. Wow. So it was a no-brainer, a no-brainer for private equity firm. And when these situations come up, it just got to be hard to go from entrepreneur, mogul, self-employed, king of the world to being an employee. It just has to be an unbelievably hard transition.

1:26:41I can't imagine how they did it. I was always shocked that they were gonna do it, but I knew they didn't have any choice. But Matsushita didn't want to ruffle lose feathers because one thing the Japanese companies are always ultra sensitive to is politics. And Lu was still very connected politically. One of the guys on the MCA board was a guy named Bob Strauss who was head of the Democratic National Committee.

1:27:09They didn't want to mess around with this, so they called Herb and I up said, we'd like to sell the company. That was all they said. And the reason was, they didn't want to try to negotiate with Lou. They just put up the company for sale, and Herb and I were working with Edgar Broffman, frankly, on trying to take over Warner Brothers. This was before the Warner Brothers and Time Ink merger. This was before. Got it.

1:27:39And we had quietly accumulated 14% of the stock through Allen and company for the Bronfman family. And I met with Steve Ross three weeks before he passed away. He was one of the greatest guys in history of the business. And he gave me three hours of his time, where I came to him and said that Sigurd would put up six billion of cash with a standstill.

1:28:09and Steve assigned the deal to his deal maker. And then as he got sicker and passed away and all fell apart. Well, Michael, as we come up toward the end of your tenure here at CAA, can you talk us through the generational transfer and the sale of the business to the next generation, the young Turks and then your time at Disney after that? How did that all come to be?

1:28:36I was pretty much hitting the end of my useful life as an agent. I was about to turn 50. I'd been working since I'm 16 in the entertainment business. First for Lou, right at Universal? It was my first job tour guide at Universal Studios. And I just didn't want to be in service anymore. I wanted to try to run a public company for five years and then, frankly, thought about going into public service. Not private.

1:29:06service. And I was very friendly with Michael Eisner. He was one of my closest friends. He had a heart attack and a quadruple bypass. Two of the board members started talking to me. And I spent a year talking to them on and off on and off. And then Ron Meyer blew up. He just lost it. He just couldn't be in service anymore. He just he was over 50. He had hit a point where he just couldn't talk to clients. I will never forget this. He had a conversation on a Sunday that probably lasted six or seven hours with one of his clients. It was Sylvester Stallone. And he finished the conversation and tried to have a rest of his Sunday and slide called back. Want to start the conversation all over again. And that's a little unusual, but not completely unusual. That's within the realms of reality for an agent.

1:30:06Yeah, in the entertainment business it is. Yeah. Look, actors are gypsies. They have no one to talk to except their agent. So Ron just couldn't deal. And also, I had thought about going to MCA and at the very last minute, they tried to change the deal and it became clear to me that Edgar wasn't in charge and just too many signs as a deal maker said to me, this isn't going to work. Now, that was before Ron decided to quit.

1:30:37So I figured I'd stick it out another year and then afterwards Ron had already made up his mind to leave and I should have realized he had two feet out the door when he left It just made me take the Disney conversation more seriously The board members that were friendly with me one of the board members owned a boat with me We were really tight and he said we want you to come over and create the culture here that you had at CA. And Michael was sick. He wasn't supposed to work every day. I always like to say, I am the greatest cure for heart disease. Because when I came over, I was working seven days a week, 14 hours a day. And he was supposed to work two days a week. And he started working a little harder and harder. And his doctor was telling him not to. And it just was very clear from the beginning. It just

1:31:36It wasn't going to be a team effort for whatever reason I threatened them, which shouldn't have because I didn't want his job. I had a game plan for myself. I didn't want to die at Disney. I didn't want to die at CAA. I wanted to try different things with my life, like what I'm doing now. I love what I'm doing now. And all of the training I had as an agent has led me to a career.

1:32:03In the digital world that's fantastic because what am I doing? I'm packaging I'm putting young founders together with money and distribution and Nothing different than I did for 35 years. It's all the same except I'm doing it with smarter people and I really enjoy it But when I got to Disney it was very clear there was a head-to-head conflict and Michael undercut me every chance he could And after a couple of years, I just didn't want to deal with it anymore, and it was one of those things. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

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1:33:57billion workflows annually, and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates. And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. If the universal job had worked out, if you had gone to universal, do you think things would have played out differently? I mean, universal is a very different company than Disney, much more pure play focused on content at the time than Disney was. Would that have been better or different? You know, David, I'm going to tell you two things that both conflict with each other because you asked a really smart question.

1:34:55Part of me thinks that I would have done an amazing job at building that business because when I went to Disney, I put together seven initiatives that I wrote about in the book that would have made Disney a fortune, starting with buying Yahoo, buying CBS records for $2 billion, which is worth 10 times, 20 times that right now, buying a publishing company instead of throwing money at it.

1:35:24crappy publishing company that they had. I had a chance to buy from Universal Penguin Putnam, which is now the biggest publishing company in the world. I would have done that at MCA, though as other part of me said, I would have failed at MCA too, because the Bronfman family would have never given me a free reign. And frankly, I'm not a very good employee. You and Lou Wasserman both. Yeah, I mean, I shared that with Lou.

1:35:55My critique of Lou goes for me. I'm a terrible employee. I like to swing for the fence, and I like to have autonomy, and I don't like to answer to anybody. And I was too thickheaded to see that clearly and only saw it in retrospect. But I did the same thing Lou did. And I should have been more self-actualized.

1:36:24to understand that I'm not a follower. I'm just not good at it. And I have no problem admitting that now. But, you know, hindsight is 2020 vision. And it's always easy to be a Monday morning quarterback in the height of transitioning from CA to Disney. I actually thought I made the right decision. I was going to a place where the board solicited me. I'd had a year's worth of conversations.

1:36:53my best friend running it, who had a heart attack. To me, it was a no-brainer. Five years there. Then I go into public service. I actually was on the council of foreign relations and was really interested in working at the State Department in some way, shape or form. And I had a whole game plan. But you know, the best plans of mice and men. And reflecting back on that.

1:37:18having one of the world's best deal makers both in Hollywood and then proven in the corporate environment that seems like a natural fit for the State Department. I felt really good about going into government service. I really did. And whether it was a State Department or something else, I would have felt really strong about doing that. But look, I made a game plan for myself just like I used to make for my clients. And I made a mistake. And I didn't take into consideration certain things that I should have. But at the end of the day, it worked out fine. I made a good settlement at Disney, made me comfortable. I took some time off. Then went right back to work and a guy named Mark Andreessen and his partner Ben Horowitz kind of saved my skin, you know. They asked me to be on their board in 99. They gave me a road map.

1:38:17At Loud Cloud, right? Yes. At Loud Cloud, they gave me a road map to a new career. And they're two of my favorite human beings on the planet. They're smart as hell. They rival Crichton and intellect. They are loyal. They are smart. They are wise. And they are true, true friends. And they beat me up pretty good, which is hard to do. And they did it brilliantly and set a path for me that changed my life yet again. I had a third career. So you want to talk about luckiest guy on the planet. You're talking to him. If you would ask me in 97, if I was a lucky guy, I would tell you I was pretty stupid. But by 99,

1:39:20These two guys came to the rescue and showed me another way to use my skill set which I do every day now and Weirdly, it's how I got to you guys. You got to me through mutuality of interest in the world of the internet. Can we ask you what playbook from CAA you learned that you brought to technology what are some things that You're doing the same or lessons you learned. You know, it's funny. I had this conversation with a founder yesterday, a young founder that I'm investing in. I do not do one thing different today than I did 30 years ago. Not one thing. I talk to guys your age that are the talent. And I put them together with financing. So they're the buyer. And then I help them market.

1:40:19monetize and strategize their product. It's the same thing I did. So if Dustin Hoffman says to me, I've got this idea, I want to play a woman in a dress who sees life as a man through a woman's eyes. And he's the motor, he's the talent. It's my job to surround him with more talent, get him money, help him market, strategize how to do it.

1:40:48and then monetize it so he makes some money doing it. I'm not doing anything different today. It's just the companies come out public but they don't come out on the film. No different. None. Zero. After you left CAA, the era was over and ended up getting bought by private equity, the agency business, at least to RIs from the outside. It has been remade with WME and RIA Manual and Patrick Whitesell.

1:41:17If you had stayed at CAA, what would you have done there? What could have made CAA enduring franchise that became a gigantic force rather than sort of apexing as you exited? So, you know, it's fun to add dinner with Ari a couple of weeks ago and we were, you know, he was a trainee at the agency and one of the best we ever had. And I think he's done a fantastic job at building his business and diversifying it.

1:41:48I spent a lot of time, which very few people know looking into how I could diversify CA. Could I run it public? Could I sell it to private equity? Could I buy an ad agency and I looked at buying Jay Walter Thompson? I looked at bringing in private equity and at the end of the day, I didn't know how to divide it up amongst the players. I couldn't figure out how to get it transitioned to a bigger entity.

1:42:18And Ari said, well yeah, Michael, you could have bought an ad agency and blown the company up. But I said, I said, Ari, this was 30 years ago. Economics were different. Public entities were different. Private equity was different. It just wasn't like it is today. And I couldn't figure out, I keep my core group and compensate them all. And I decided it was better to make a clean break.

1:42:48and try to do it on my own in a different field. So how could it have been? Yeah, I could have bought Jay Walter Thompson. I would have gone into debt. I wouldn't have known how to give options in what? To so many people at the agency because how do you tell a group that's all for one one for all? We're splitting all the proceeds and then go through what all these companies go through is How do you give options out to everybody? Right. Because it was you and your founding partners primarily that owned 90 plus percent of CIA. No, we owned 100 percent. Okay. But there was no way to make everybody happy. And all I could see, frankly, was the agency disintegrating. And I like to think I made the right decision because unlike the decision Lou made where MCA disintegrated, C.A. is still going strong today.

1:43:45They've done a great job in the core agency business. They didn't expand it beyond that, but that's okay. That's their prerogative. But I think the guys have done a pretty good job. It's not what I would have done, but it doesn't matter. It's not my company. But I'm still take pride that 45 years later, still in business. Good for them. I can't think of any other companies we've covered on this show in the 200 plus that you really were a true family business. I mean, it was a partnership. It was an LLC. Believe me, if I could have split up the business and made it bigger, I would have done it. Ari said, well, you could have been the biggest investment banker, as biggest Goldman Sachs. And I reminded him, I couldn't have been, because they, I'd have to compete with them and be, they're in a feed driven business. And that was the business I was looking to get out of. And by the way, at that moment, I'll give you the kicker.

1:44:42which I've never said to anybody. The thought of being in the client service business to big corporate clients was boy, that's sourd my stomach because I had had enough of service. One thing about going to Disney that I will say was positive, man, it's easier to be a buyer because you just everyone's calling you. It's easier to be a buyer. Yeah, you Created a lot of value and captured a lot of value in other scenarios and at other points of CAA's life, you created a lot of value at the end and made a pretty sweetheart deal for the next generation that you sold the firm to. And at least my research found that you sold all of CAA to the next generation for 200 million, which of course they didn't have in cash.

1:45:31and they were able to pay you with the profits over the next five or so years on an interest-free loan that you effectively made them. And keep in mind, this is the business that has a enduring revenue stream of Jurassic Park and all these other franchises that have recurring revenue associated with it. I only cared about the business thing alive. And I felt that if I didn't do that, 20 people would peel off and do their own business. And I wanted the franchise to stay alive.

1:46:00Frankly, I didn't care if I got paid immediately or five years down the road. It made no difference to me. It wasn't about that for me. I was very lucky. I made quite a bit of money as an agent. It wasn't a driving force for me. And I knew I had the Disney thing lined up because that discussion contrary to what people realized had been going on for a year. It wasn't fresh. So I knew I had that and I was going to get paid handsomely to go there because they had outlined a deal to me. Before Frank Wells died, he tried to get me to come over. I was closer to Frank Wells than Michael Eisner was. Oh, wow. Frank Wells was part of a trifecta at Warner's. It was Frank Wells, John Kelly and Ted Ashley. So Wells and Eisner, Wells wanted me to come and be the third part of the trifecta because that worked for him for 20 years.

1:46:57So I knew what I was getting into and I knew money wasn't gonna be a problem. Well, Michael, that's it for our storytelling and our analysis sections. Thank you so much for being here with us today. My pleasure. It was really great. I appreciate the time. I appreciate your homework and I appreciate just being a part of what you're doing. I like what you're doing. I'm glad to be a part of it. Thank you, Michael. Thank you. I'll be shortly sending David a contract.

1:47:26with my fee structure. The Brink's track is on read. All right, guys, take care of yourselves. All right, Michael. Thank you so much. Bye bye. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale. Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn.

1:48:07what changes actually created value for customers, and how fast you can use that signal to guide what you shipped next. This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences, or just evolving your existing core product, go to Statsig.com slash acquired to get started.

1:48:37Oh, so fun. Listeners, thank you for joining us for the whole season. But, my gosh, what a privilege to have Michael Obit's on the show. I wish we could have made this like a five hour episode. What does it we got to give Michael back? For sure. Oh, we have to. We also have to do some kind of like acquired bingo where there's an Allen and company conference square. And we've figured out how many episodes that's come up on. All right. Here's the thing though. When are we going to do a live show at Sun Valley? That does feel like that's the cake topper.

1:49:06I think it'll let's make it happen in 2022. All right, new goal. All right. Alan, a company, if you're listening, let's make it happen. Listeners, we want to wish you a happy holidays. We want to say thank you for being with us this season. Thanks to the close to 100,000 who joined this year, or maybe over 100,000 of you who joined this year. Thanks to all the new folks who signed up for the LP feed. LP's, of course, we love our LP's. They make the show possible.

1:49:32I'm saying this before the zoom call, but I'm sure we've had a great LP zoom call for everyone who could join before we left for the holidays and we'll be dropping some more fun exclusive LP only content in the future. For now, if you want to check out all 50 plus LP episodes that we've done, that back catalog is public. So go check it out search acquired LP show in any podcast player. You can join the Slack at acquired.fm slash Slack. You can get your dream job at acquired.fm slash jobs.

1:50:01David, there's so many slashes. You look like the creative artist agency of tech podcast. Start doing some packaging. Well, Michael would say we'd probably be stepping on his territory, but package some startups in the acquired community. It's happened. It happens in the acquired slack all the time. It totally has happened. People have met co-founders in the slack. I know people have raised money in the slack too. 100%. It's pretty cool. Without listeners, thank you. We'll see you next year. We will see you next year.

1:50:31Who got the truth? Is it you? Is it you? Who got the truth now?