Mark Cuban: The NBA Thought It Was in the Basketball Business. It Was Wrong. (Part 1 of 2)
00:01Mark Cuban started selling garbage bags door to door at 12 years old.And he says that's where he learned everything about business.This is the first of two conversations we had with him.And in this one, he gets into what really makes a great entrepreneur,why he thought the entire NBA had a wrong about what business they were actually inand what made him want to take on the whole pharmaceutical industry.So what does he say is the single greatest skill in business? And what does trust actually equal?Hi, everyone. I'm Lynn Toman and this is three takeaways. On three takeaways, I talk with some of the world's best thinkers, business leaders, writers, writers, politicians, newsmakers, and scientists. Each episode ends with three key takeaways to help us understand the world and maybe even ourselves a little better.
01:00Today, I'm excited to be with Mark Cuban, entrepreneur, investor, and former owner of the DallasMavericks.He went from getting fired at 25 to building a billion-dollar career and inspiring entrepreneursthrough Shark Tank.And now he's working to disrupt health care with cost plus drugs.Mark, great to have you.Thank you for joining three takeaways today.Thanks for having me, Lynn. I'm really excited to be on the show. Me too. Mark, you've built several
01:35businesses and you've invested in many, many others. What makes a great entrepreneur?I think somebody who is so committed to their business and the goal they're trying to accomplishthat it's all they think about. They dream about it. They eat, sleep and breathe it,sometimes to the detriment of themselves or others.Part two is they love their product or service so much.They believe that selling to somebody is helping them.And third, they're nice.You know, they develop relationships and connect to people and communicate with people
02:12so that whether it's a customer, an employee, a stakeholder of any type,their interests are aligned.So what do you mean they care about their products so much that they think they're helpingpeople. Can you make that concrete? Sure, like cost plus drugs.com. We have lowered the cost ofprescription medications significantly. And I know that when people buy from us, it's primarily because ofprice and that we're allowing them to buy medications, they may not have otherwise been able toafford. And I know that because people come up to me on the street, they email me, people writearticles and letters and just saying, hey, I wasn't going to be able to afford my medication, but
02:52now with cost plus drugs.com, I can. And in doing that, we don't have a sales force. We don't havea marketing team. We haven't spent a penny on marketing at all because I know that when somebodysaves hundreds, if not thousands of dollars on their cancer medication, they're telling the doctorwho is now going to prescribe it to patients, who might have high deductible plans, whatever it may be,whatever disease group they're in on Facebook, they're telling those people. When you help people,it's not necessarily selling, they'll help you and turn around and tell others.And how did you learn this?Just to experience.
03:30You know, starting to sell when I was 12 years old, my first quote-unquote job was sellinggarbage bags door to door.And it became very simple when you go up to somebody in your neighborhood and knock ontheir door and go, my name is Mark, do you use garbage bags?And then you realize that making their life a little bit easier by bringing a box of 100garbage bags, they don't have to worry about it now. I could tell by their reorders that this wasa service that they needed and it was helpful to them. If you can reduce the stress of people whoare your customers, they're going to stay customers. That's a wonderful story. You said that
04:07people need to eat, breathe, and sleep their business. Does that leave room for anything else?It's a good question because it's hard sometimes. You know, it really depends on your personalcircumstances. If you are already set financially and family-wise, then you don't have everythingat stake. If I started business today, like when we started cost plus drugs, you know, I eat,sleep and breathe it, but I don't necessarily have to wake up in the middle of night and takenotes like I used to. When I first started after getting fired with microsolutions, literally I wassleeping on the floor. I had five roommates in a three-bedroom apartment. And it literally consumed me tothe exclusion of a lot. I went seven, eight years without a vacation. I, you know, went through
04:54relationships because I made it clear that this was my mission. I didn't want to sleep on thefloor. I didn't want to stay there. I wanted to be in a position where I could control my own time.And it wasn't like a regular job. I had to give things up and make commitments. And being anentrepreneur typically means giving something up. Giving everything up is really what you're describing.Pretty much, yeah, because you always have to realize there's somebody competing with you.Even if you may not know they're competing with you, there's people who may not love your product or service as much as you do and may not be willing to buy it.There's costs associated with that.You may not get your cost back.
05:33And running a business is never just a straight line.Hey, I've started.We're going right to a million and 10 million in sales and will be very profitable.It never works like that.And most people don't know it until after they've started.How important is being agile?You've got to be able to zig in that because, you know, if I'm competing with Lynn and her company,we happen to be in the same industry and I do something smart, then you have to adapt and you
05:57have to be agile.And vice versa.If Lynn does something credible, like we know she will, then I've got to be able to adaptand adjust.And so many times, like now with cost plus drugs.com, we're competing against behemates.and when you run with the elephants, there's the quick in the dead.So I've got to be quick to make sure that I can adapt and do things as they do thingsand try to actually stay ahead and make them respond to us, which fortunately we've been able to do.
06:26What does Agile mean today with AI?AI is a tool like any other tool.AI is not perfect.AI is like that person we all know that remembers everything.You know, I have a girlfriend from college that I can ask her what we did that one Thursday,on spring break and she'll tell me exactly what it was. And AI, it kind of remembers everything, too.But AI doesn't understand or doesn't know the consequences of its actions or recommendations.Somebody said it best, you can't use AI as your ghostwriter. You have to use it as your sparring
06:59partner. If you just accept AI and everything it says, it's not going to work well for you.If you always question it and use it as a tool where you're always asking questions andasking, are you right, please check?Those types of things, yes.There's two types of people that use AI in my estimation.One, there's people who use AI so they don't have to learn anything.And then there's other people who use AI so they can learn everything.And if you use AI so you can learn everything, it's a great resource.
07:29One of the biggest challenges I had, and I think a lot of adults have, kids a little different,is you've got to get comfortable talking to your AI.It takes a little bit to break down the barrier of having a conversation with artificial intelligenceand you get into a situation always where you feel like you're talking to a person.And you have to remind yourself it's not a person, but you also have to feel confidentand comfortable in not hesitating to talk to them.That's a lot of agility for people in the business world these days.I love that analogy of a sparring partner.
08:03What do you think is your biggest skill?probably being able to look at any business and faster than anybody understand exactly how they make money,understand exactly how they sell their product, understand exactly how their business works.It was honed over 15 years in Shark Tank where the other sharks used to give me a hard timebecause someone would walk in and the minute they finished their pitch, I knew exactly what business they were in and how things worked.I can look at businesses that are pitched to me.I can look at businesses that I'm in.and as things evolve, whether it's the first day in, the first year in, fifth year in,
08:38I can look and see what's going on and really understand all the business elements.And that's really served me well.In healthcare, I think I've brought a unique perspective to trying to understandwhat's going on in the world of healthcare, because most people don't understand thatit's so vertically integrated that there's a lot of gamesmanship going on.And I've been able to pull those pieces apart and really make people aware exactly howhealth care works. Can you give some other examples of how an industry works?Sports. When I bought the Dallas Mavericks in 2000, everybody thought they were in the
09:14basketball business. And I would go to NBA board of governors meetings and they would talk aboutbasketball, basketball, basketball. I'm like, no, you don't understand. We are not in thebasketball business. We are in the experience business. You own teams and you couldn't rememberthe score of a game three games ago, but you remember who you were with.You remember if you had fun or not.You remember the look on your child's face or your niece or your nephew's face.You remember your buddy that got drunk and puked on the row in front of them.You know, it's the experiences that we have that gives people a reason to go to sporting events.
09:48And we had to understand that we were not in the basketball business.We were in the experience business.I love that.That reminds me of Danny Myers, the founder of Shake Shack.He thought he was in the restaurant business, the food.and beverage business, and he realized he was actually in the business of making people feel better?Yes. People ask me, you know, who do you hire and what do you try to do? People say, well,if you ran for president, what would you do? And it's always the same answer. The job is to reduce
10:18the stress of people around you. The job is to reduce the stress of the people that work for you.The job is to reduce the stress of your customers or the American people. Because we all faceso much stress in everything we do, even of our own making. Just the people. Just the people.around us, the information we consume, the social media things that the algorithm finds for usand sends to us. It can be very stress-inducing. And so I think one of the greatest skillsand the focus that I tried to bring is, how can I reduce your stress? And if you do that inbusiness, you are reducing people's stress. And that's just a magical skill. And you're makingthem happy. Yes, they go hand-in-hand, right? Less stress, bigger smile. So your parents didn't
11:01go to college, your dad lost an eye working. How did you learn this skill to be able to understandbusinesses and what business they're actually in, which most people don't actually understand?My parents both pushed me to figure things out for myself. My dad literally would cry and say,you know, I can't help you. You have to learn it. You have to figure it out. My mom,kind of the same way that always ask questions.always question authority, always build your confidence by trusting yourself and learning.And I guess the greatest skill set they gave me was pushing me to be curious about everything.And once I became curious, then everything fell in place from there because that's literally
11:47one of the greatest skills that you can have because the world's ever changing.And for a 12-year-old, a 16-year-old, asking for an Encyclopedia Britannica,literally trying to read it cover to cover and thinking it was a great day when the Encyclopediaof Britannica showed up at our house, you know, that was my requested birthday present. I think thatreally pushed me. And it's the same today. And going back to AI, that's one of the beauties ofAI because it's a great democratizer of knowledge. It's not perfect. Doesn't get everything right,but not every book you read is automatically going to have the right answers either. And so AI,whether you're 10 years old in a horrible family situation, or whether you're in our circumstances,
12:28you can always ask questions and learn just about anything.There's not much you can't learn.And that is just a great equalizer that didn't exist five years ago.I love your story about the encyclopedia of Britannica is of birth to thousand.It's crazy.Before I ask you more about health care, you've said your parents taught you to be nice.Has that been an advantage in business?Well, to be honest, I wasn't nice for a long time.
12:56my first company, all I knew was what I saw on TV and books I read, you know, and movies I saw.And I always thought to be a businessman, you had to be very specific and sometimes condescending and very overconfident, you know, a little bit of the fake it till you make it.And I was very demanding.And I wasn't considerate.Like if someone did something I thought violated common sense, I would get mad.And then one of my partners came up to me a few years later and he was like, Mark, you're scaring people.You are so intense on all this stuff.You need to be nice.
13:33That's the last way I want to be.And that turned it and it turned out to make things a lot better and a lot more effective.And that's where I learned my lesson.And how do you think about success today?And has that changed over time?Yeah.It's obviously changed over time somewhat.Because when you're sleeping on the floor with five roommates,
13:53you have a different definition of success.When you come home and the lights are turned off or you go out and your credit cards cut up,that gives you a different definition of success than today.But I think the theme underneath it all these years has been just waking up with a smileknowing that I can make today a good day.To me, even when I was broke, I was successful.I could put a smile in things.And people say, you know, the money by happiness.
14:19And what I've learned is if you were happy when you were broke,you're going to be really, really happy when you're rich.If you weren't so happy, it didn't have a good attitude when you were broke,that doesn't automatically just go away because your bank account.Cost plus drugs.Why did you create it?I actually got a cold email from my current co-founder, Dr. Alex Oshmiansky.And what he said was, right now in this day and age,
14:44there are generic medications that go on a short supply list,an FDA-mandated short supply list.and that includes pediatric cancer drugs.That includes drugs for operations.I'm like, how does that even happen?That's ridiculous.And it got me looking into the drug supply chain and the pharmacy industry in general.And it was right around the time the farmer bro was going to jail.
15:08And, you know, I don't even remember exactly why he went to jail.But I was like, how can this guy raise the price of this one drug, dare a parent, 750%.That's just crazy.And so the more I dug in, the more obvious it was that there was no transparency whatsoever.None.So because of that lack of transparency, we saw two opportunities.One on the manufacturing side to make drugs that are on short supply.And two, to create a pharmacy that effectively was completely transparent because even to this
15:38day, people don't know what it costs for medications.They don't know what it costs for healthcare unless they buy from costplusdrugs.com.And so we decided to take a completely different approach so that when you go to cost plus drugs,we launched in January 19th of 2022, and it was the same then as it is today, just a lot more drugs.When you go there and put in the name of the medication, if it's one of the thousands we carry,it comes up.But where we're different is we'll show you our actual cost.And then we'll show you our markup, which is only 15%.
16:10And it's $5 for shipping and handling and pharmacy fee.and because we only marked it of 15%,and because people could see exactly what they were going to pay,our business just took off.And so the whole thing really originated around a cold emailand the desire to help people.So the product you're really selling is transparency.Transparency, but more so that leads to trust.
16:37I was listening to a podcast, and there was a doctor,and I wish I made note of their name,who said that trust equals transparency divided by self-interest.And they nailed it.That's exactly right for any business.The more transparent you are, the numerator, that's a huge positive.To this day, four years after our launch, we're still the only pharmacy that publishes a complete price list.And then there's self-interest, the denominator.
17:04To mark up a product only 15% when others are marketed up 100, 200,000,000,000, that shows that we have self-interest.trust, but we're not going to steal or cheat you. And that's what builds trust. And when we were firstgetting started, a lot of the people we were bringing in, well, what are you doing for marketing? How are youmarketing the company? I'm like, we're not. Like, what? How are you going to get people to buy from us?When you say someone thousands of dollars on their cancer medication, they're going to telleverybody. And so trust comes from being transparent, showing people you have their interests at heartas much as your own, and then they'll trust you. And when they trust you, people want to dobusiness with people, they trust, and they'll tell others as well. And you don't sell people's
17:49medication information to 500 or 1,000 partners? No, none of that. No, no, none of that.Like everybody else does. Yeah, we make our 15%, and that's it. We build other businesses. We have awholesale business that we sell to hospitals and clinics, because they're just as bad and buyingmedications as patients are. And then we've expanded our manufacturing.and we've shrunk it so that we can do things like make end of one medications in a tractor trailerthat we can ship to a research center.So if somebody, you hear all these stories all the time about somebody has a disease andthey're one of 15 people in the world and they raise a lot of money to try to help them,
18:26and that's great.And then they send that money to research scientists and doctors.But when they come up with the therapy to give to the patient and have it administered,it's expensive to manufacture.So we've been able to use what we've learned over the last.four years and shrink that into it, literally the tractor-trailer size thing. And we cut the timefrom six months to four or five months, but more importantly, we've cut the price of manufacturingthat therapy for that really rare disease from half a million to a million to 50,000 to 100,000.
18:58And because you can also ship that trailer to that research location, they can iterate more oftenand improve the chances of helping the patient.Mark, thank you so much. And thank you for inspiring so many entrepreneurs on Shark Tank and also for starting cost plus drugs.Thank you.Join us next time for part two of our conversation with Mark Cuban.If you're enjoying the podcast and I really hope you are, please review us on Apple Podcasts or Spotify or wherever you get your podcasts.It really helps get the word out.If you're interested, you can also sign up for the Three Takeaways newsletter at Three Takeaways.com, where you can also listen to previous episodes.
19:45You can also follow us on LinkedIn, X, Instagram, and Facebook.I'm Lynn Toman, and this is Three Takeaways. Thanks for listening.
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