The Exchanges

Q So what was the path from that interest to what led to Pawn Stars, that first big one?

A It doesn't sound real, but I was on a bachelor party, and when you deal in unscripted reality TV, you're always looking around you for ideas. I was smart enough to hire what we call a production assistant, but we weren't producing anything. We were on a bachelor party. I figured we would need somebody to get us around and get us Advil in the morning. We literally drove by a pawn shop, and that made my curious mind go, has anything ever been done here? We did what we do, which is call the networks and ask, have you been pitched this? What do you think? What would you like? And we got a lot of the same feedback, probably not for us, a little too dark, a little too dingy. We didn't take that as a don't go do it. We took those notes and tried to present something that highlighted the top five percent of what goes through those guys' pawn shop, which happens to be high-end art, airplanes, Super Bowl rings, and all kinds of cool stuff. We really pitched it as a show that told the stories around the stuff. It just happened to be that the guys were hysterical characters as well. Pawn Stars was one that on paper made no sense. The American or even the international understanding of pawn shops, where, where criminals would go to hawk their stuff, but that's very well protected usually from happening. What we're best at, our core skill set of unscripted TV, it's finding big characters. An…

AI assessment note: “We literally drove by a pawn shop, and that made my curious mind go”

Q So you sold the business to ITV. What was those next couple years like in that phase of your career?

A Many companies will go to market and talk to 15 buyers. We were in a spot where we didn't think we had to sell, which of course is a nice spot to be in. I really admired the guy running the American operation, Paul Buccieri, who now runs the A&E Networks. And then the CEO of the global company is probably the most impressive CEO I've ever spent time with. His name's Adam Crozier, and he'd done four big turnarounds in the UK. Saatchi and Saatchi, the Football Association, so think our version of the NFL. The Royal Mail, so our version of the U.S. Mail, which, as everybody knows, is not an easy business, and then ITV. ITV was in the absolute shitter when he came in and turned it around, and he really, in my time with him, talked about what he saw in our business and what he saw in our team and what he thought the future could be for us beyond just a typical earn out. Those things came together and really provided us the next opportunity, which happened faster than we thought. My boss, Paul, went over to run A&E, And that created an opportunity for me to take over the American operation, which in addition to my four companies, had six other companies. What I was inheriting was Fixer Upper, Cake Boss, Duck Dynasty, Hell's Kitchen. We would launch Queer Eye for Netflix right after I got there. But it was also an interesting time in the business. A lot was happening in media. I'd nev…

AI assessment note: “created an opportunity for me to take over the American operation”

Q Walk me through an example of identifying one of those talented people. What do you actually do with them to monetize that brand, that relationship with the consumer?

A Mark Rober is one of the more impressive guys out there, and he won't be known to a lot of the viewers, but I strongly encourage anybody to look him up because he's about 40 years old. He was a literal rocket scientist at NASA and an Apple designer, but like I was saying about Rodriguez earlier, Mark is a genius who really can tell incredibly complicated scientific information in digestible bites, and he uses humor And clever storytelling. And instead of doing 12:02 TikToks, he does 20 minute YouTube clips. When Jimmy Kimmel found him, Mark had a couple 100,000 viewers, and Jimmy started putting on, on his show as the science expert. People saw him and fell in love more. When we got to Mark, he was making a ton of money directly from brands, going straight to an audience, getting 40 or sixty million views a video. People were sticking through the whole episode. That's not hard to go sell to a television network. It was harder to sell it to Mark to do television versus just keep doing what he did. Now we've set him up with a couple series at Discovery Plus that he's in production on. Mark can be the face of pop science. He can be the face of the Discovery Channel. He cares about kids. If kids like Mr. Beast, they typically like Mark. Another younger, typical version of a TikTok influencer creator would be the Hype House. The Hype House became the first TikTok house. What does th…

AI assessment note: “Now we've set him up with a couple series at Discovery Plus”

Q I'd love to dive in on how the flywheel works at Wheelhouse. As you're making an investment, it's centered around content. What type of content are you trying to invest in?

A If you've ever seen the Disney flywheel, it's pretty easy. You Google, 1957 Walt Disney business model. I always joke that he's Walt Disney, so he drew his business plan instead of writing 500 pages. It doesn't matter where the intellectual property starts. My daughters met Frozen through the music first. My son met Star Wars through the theme park first. But then they want the toothbrushes, the nightgowns, the Halloween costumes, They want to listen to the music, go to the movie theater, and then watch Disney+. I should mention that my more famous partner is Jimmy Kimmel. Jimmy really leveled us up with talent and relationships that is sort of second to none. We joke that he's the mayor of Hollywood because once a year, the biggest stars in the world are going through his couch to promote whatever is the most important thing for them at that time. Whether it's us as unscripted producers or Jimmy, We're always seeing trends by design early to try to cast this as a pawn shop as the next big wave. Chefs. Nobody was watching or talking about chefs as celebrities before unscripted TV. Certainly the same about real estate brokers. We just announced two shows for Netflix in Miami and LA. One, it's called The Agency, a real estate firm where the husband is one of the guys on Real Housewives of Beverly Hills. And then in Miami, there's a husband-wife design firm. These folks are the ty…

AI assessment note: “Whether it's us as unscripted producers or Jimmy, We're always seeing trends”

Q Which two people have had the biggest impact on your professional life?

A I'm not just saying this because I'm married to her. My wife came into my first business never in any way, shape, or form wanted to be part of a startup. She is complimentary to me in every way. She is smart and organized and thoughtful and has empathy, and she really became the heart of the business, but also equally matched with brains and helped me build that business. She was there before Pawn Stars and then helped me through the sale. And now she's taken her talents to a completely different world. But I think our world of making stuff happen on television translates and she's running a really great real estate business with her two former female lieutenants. And I think it's great because they boss guys around all day and they deliver on time and on budget, which is unheard of as a consumer in that world. And then the other one would have to be my chief strategy officer at Simpson. He came over from the UK and had seen what had happened in media over there. Which happened five years before it did here in the States, and he had a business degree, but was also a showrunner like me, so he could talk to both sides of my right brain and left brain. Always made me think bigger and pushed me where my more conservative partners, who I give a ton of credit to as well, reeled it all back in and we landed in a natural place. But Ed left with me from ITV to start Wheelhouse, along wi…

AI assessment note: “My wife came into my first business... And then the other one would have to be”

Q So what'd you do with that interest coming out of school?

A I went to college, started studying business, went through two oh nine and two 10 accounting, wanted to put a knife through my eyes. I did sales some through college. I can still tell you quite a bit about Cutco knives. If you've ever done direct sales, knives to housewives in the Cutco world, you get told no a lot more than you get told yes. And that was good training for television where you get told no a lot more than you get told yes. Then I serendipitously ended up working for a local radio station and then graduated to television. And I really love storytelling. So coming out of college with a journalism degree meant I was always curious, and I think curiosity is critical to anybody who wants to invest. Once I figured out that there was an actual business where you could tell creative stories and make some money doing it and have your own business, I thought, wow, this is for me. That manifested itself first into shooting weddings of bat mitzvahs, which wasn't what I set out to do, and then renting out my equipment to other people. But then finally, I started making television shows in my twenties for other people, which then eventually led to me starting my own business and being able to sell my own TV show ideas.

AI assessment note: “ended up working for a local radio station and then graduated to television.”

Q Once you had that success at Pawn Stars much higher than you had thought, how did you start thinking about the business around it?

A A lot of people don't want to take risk in any business. I was probably too dumb or didn't have enough dependencies at that time to think that way. We took everything we were making for really the entirety of my first business, always put it back in. One hit wonder was the first thing that made me think, how do I want to take this opportunity with Pawn Stars, which had risen to number one on TV at that time against scripted, unscripted, everything, which was unimaginable, still unimaginable. You're in the incoming business then. You've got a hit. You're not going to get two or three years to have another one. You've got to strike while the iron's hot. So we immediately pumped a ton of money back into developing our own ideas, which means you're footing the entire bill. And then you hopefully go out and sell it. We were very fortunate to take out our next slate and sell the vast bulk of it. And then all of a sudden we had a real business.

AI assessment note: “we immediately pumped a ton of money back into developing our own ideas”

Q demo at ridgeline.ai. And now back to the show. What have you seen as an investor when you're in this both competing against and partnering with other professional investment managers but don't have your operating experience and knowledge of how to promote and get things in the public conscious for, say, these consumer goods? What have you seen from that insider's perspective that surprised you that other people didn't know?

A There's founders and there's CEOs. In rare occasions, the founder can be the CEO. And obviously when that works, I think it works most beautifully. My biggest surprise was how much disconnect there can be between the founder and the CEO when they take the capital and how much ill will can get developed really quickly between the investors and the founders. We're quite used to managing talent and having relationships to where neither side can ever hopefully push too far. And go past the point of reason. We're very relationship bound. Private equity puts a timeframe on the investment and the founder and puts a real noose above their neck if it's not seen as a real partnership. So we can go in often now with these private equity folks and help give them a founder's point of view from the outside and help them with the founder in ways that might just sound a little different coming from somebody else other than a traditional private equity. On the flip side, Catterton, for instance, who we really love working with, they knew the supply chain and how that hydro machine was going to be made and hit market and not run into some of the pitfalls that previous Connected Fitness had. And they also had looked at every single one. They believed that. They had all the inner workings to give us confidence that if we did the things that they were asking, that hydro would hit the mark. We're in…

AI assessment note: “My biggest surprise was how much disconnect there can be between the founder and the CEO”

Q As you grow the number of investments you have, how do you think about effectively taking care of more and more children? When you have one project and you get one person on Jimmy Kimmel, and then how do you do it again and continue that momentum once you get it started?

A It's funny, you almost go through these phases. We went from having one production company to creating an engine that served four different companies. I always say we've got to treat our new children with more love than the current family because we should have a little bit more patience and understanding built up with those guys. But it's about building an organized infrastructure. I have a big saying that's framed on my wall because my assistant made it for me a few years ago. Replace yourself. And in order for us to grow as big as we want to grow, We have to have that next person up. We want to find the people who are just as curious as we are. If they just want to work for a TV production company or a tried and true VC or PE arm, we're not going to be the right place.

AI assessment note: “it's about building an organized infrastructure... Replace yourself.”

Q I'm curious about the pieces of this puzzle. Why don't you walk me through the different aspects of everything you're involved with with Wheelhouse?

A When I started to get into finance and investing, it all looked the same. And certainly when I moved up to Connecticut, there were a lot more vests than I was used to seeing Brooklyn and Manhattan. But it's also different from hedge funds to venture to public versus private, et cetera, et cetera. It's very similar on the entertainment side. Now the biggest names in the world for young people are on TikTok. They're on Snap. That's going to become the spot and is the spot where we go casting for that age group. So that's one division of what we do. We try to be the bridge between the young stars of tomorrow and today, frankly, on these digital platforms and make sure that they make it onto the Netflix, Hulu's discoveries. Then you get into unscripted versus scripted. Those are different genres. We're fortunate to have a company that does film, that does scripted television. Kimmel touches all of it. We do scripted with Jimmy and unscripted. And then we just launched a new venture with the woman who was running Food Network and HGTV. That's meant to be very lifestyle focused. Very few people have run both of those networks that have done quite well through cable's woes of the last decade. Those two have held strong. Her name's Courtney White. Again, here's another trend spotter. She came here not just to make TV shows, but to really plug into everything else we're doing. We have a…

AI assessment note: “So that's one division of what we do. We try to be the bridge”

Q So over the next couple of years until you sold the business, what did it grow to look like right before the sale?

A I did something which I don't think many of my friends running similar businesses did, which was I hired a bunch of people with business degrees. I'm on a good day, a street savvy entrepreneur, but I started surrounding myself with guys that went to business schools and put me through SWOT analysis, which I came in and armored because I didn't think it was going to be that kind of SWOT. I started learning about EBITDA and arbitrage and how beautiful those two things could be together and got convinced that we should or could do the first debt finance deal in our space. We don't own the intellectual property, so it was really going off our contracts and our relationships that Barclays led a club deal for us to go do M&A in our own field and gobble up other producers who we rated very highly, so we had a group of companies. From 20 12 to 20 14, we were able to take a business that was one outfit and build it up to four. We brought in a merchant bank who, like Christmas, came out and told us what the company was making. And would make if we didn't pump every single penny back into it, and what they thought we could sell it for, which I thought was not going to happen. But it turns out motivated bankers can deliver every other time.

AI assessment note: “take a business that was one outfit and build it up to four”

Q What do you see as the biggest risks in what you're doing from an investment perspective?

A Buying in at too frothy of valuations. We've been fortunate that we haven't made big bets on those type companies. More than one or two that have been significantly marked up that we think have a little room for correction. Getting in at too high of a valuation, I think probably like most investors who are over the age of 30, I just always thought you had to create EBITDA or have a pathway to profitability. Most of us finally gave up that that was as hard and fast a rule as we once thought it was. And now we've been reminded that it does matter, which I think will be good for those of us who always were focused on that.

AI assessment note: “Buying in at too frothy of valuations.”

Q You touched on the influence of TikTok and Snap in this next generation, and I'm curious, seeing that trend, what do you do with it in terms of turning it into profitable businesses?

A Imagine if you're a baseball fan, Derek Jeter. If you're a basketball fan, LeBron James. These two guys decided that they wanted to go direct to an audience. They started the Players' Tribune and uninterrupted. That is what TikTok and Snap are. It is the chance for a talent to go straight to an audience, to not have 25 people between them, changing their message. That means these kids generally are seen by their audience as more authentic And the minute they're not seen as authentic, they're pretty disposable. But for brands, which is what we're investing in, that ability to get to a Charlie D'Amelio, or a Mr. Beast, or in our case, a Mark Rober, or some other talent we work with, that can be done today, tomorrow. You don't have to go through a studio, you don't have to go through as many layers as some of the legacy talent have. That direct to consumer we had already seen in so many other retail markets. I think the answer, much like we're seeing in DTC now, you still want retail. There's a move back to having inexperience and having a hybrid model, but that talent right now, we've always specialized in real people. I think brands and businesses are better served putting money behind real people versus actors, because actors are just not known by their audience for their passions. If you're a Kardashian, we all probably know way too much about these people, but at least a bran…

AI assessment note: “brands and businesses are better served putting money behind real people versus actors”

Q So as this flywheel brings talent and trends into you on the investment side, what's your sweet spot in terms of the stage or type of company you like investing in?

A We'll write checks off the balance sheet for early stage stuff to get relationships with the founders to learn more about spaces because we can offer the founders access to NBC host or Bloomberg's top bureau chiefs or stuff like that. We'll always get a little bit more attention and love from founders than people just investing straight capital. At that stage, it's about forming a relationship and seeing if they'll show up. We try to protect both sides Of our introductions. So if you're somebody like Alex Rodriguez, who we've been fortunate to do stuff with, who I know you've had on your shows, Alex is a pretty savvy business guy who, like me, isn't formally trained, but did as much as he could while he was playing and working 12 hours a day, because he works harder than anybody. So if we're going to try to introduce Alex to somebody, we want to make sure whoever that other person is, isn't going to embarrass with Alex, and vice versa, As part of that, you can't talk down to people. Alex Rodriguez wouldn't sit there and talk to an investor at the highest levels of baseball. Why I think he's been such a great announcer is he breaks down highly complex stuff in very understandable terms. And it works the same in both directions. I think these athletes and entertainers are just as excited to meet these founders. There's a woman who is high level in the music industry who told me m…

AI assessment note: “We'll write checks off the balance sheet for early stage stuff”