Lynn Thoman

Ep 306: Mark Cuban: The NBA Thought It Was in the Basketball Business. It Was Wrong.

This transcript was auto-generated. Please forgive any errors.

Lynn Thoman: Mark 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 it wrong about what business they were actually in, and 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 Thoman, and this is 3 Takeaways. On 3 Takeaways, I talk with some of the world's best thinkers, business leaders, 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.

Lynn Thoman: Today, I'm excited to be with Mark Cuban, entrepreneur, investor, and former owner of the Dallas Mavericks. He went from getting fired at 25 to building a billion-dollar career and inspiring entrepreneurs through Shark Tank, and now he's working to disrupt healthcare with cost-plus drugs.

Mark, great to have you. Thank you for joining 3 Takeaways today.

Mark Cuban: Thanks for having me, Lynn. I'm really excited to be on the show.

Lynn Thoman: Me too.

Mark, you've built several businesses and you've invested in many, many others. What makes a great entrepreneur?

Mark Cuban: I think somebody who is so committed to their business and the goal they're trying to accomplish that 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 so that whether it's a customer, an employee, a stakeholder of any type, their interests are aligned.

Lynn Thoman: So what do you mean they care about their products so much that they think they're helping people? Can you make that concrete?

Mark Cuban: Sure, like CostPlusDrugs.com. We have lowered the cost of prescription medications significantly. I know that when people buy from us, it's primarily because of price and that we're allowing them to buy medications they may not have otherwise been able to afford.

And I know that because people come up to me on the street, they email me, people write articles and letters and just saying, hey, I wasn't going to be able to afford my medication, but now with costplusdrugs.com, I can. And in doing that, we don't have a sales force. We don't have a marketing team.

We haven't spent a penny on marketing at all, because I know that when somebody saves hundreds, if not thousands of dollars on their cancer medication, they're telling the doctor who 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 through experience. You know, starting to sell when I was 12 years old, my first quote unquote job was selling garbage bags door to door. And it became very simple when you go up to somebody in your neighborhood and knock on their 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 100 garbage bags, they don't have to worry about it now. I could tell by their reorders that this was a service that they needed. And it was helpful to them.

If you can reduce the stress of people who are your customers, they're going to stay customers.

Lynn Thoman: That's a wonderful story.

You said that people need to eat, breathe and sleep their business. Does that leave room for anything else?

Mark Cuban: It's a good question because it's hard sometimes, you know, it really depends on your personal circumstances. If you are already set financially and family wise, then you don't have everything at stake. If I start a 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 the night and take notes like I used to.

When I first started after getting fired with Micro Solutions, literally I was sleeping on the floor. I had five roommates in a three bedroom apartment and it literally consumed me to the exclusion of a lot. I went seven, eight years without a vacation.

I, you know, went through relationships because I made it clear that this was my mission. I didn't want to sleep on the floor. 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 an entrepreneur typically means giving something up.

Lynn Thoman: Giving everything up is really what you're describing.

Mark Cuban: 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 costs back.

And 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 we'll be very profitable.

It never works like that. And most people don't know it until after they've started.

Lynn Thoman: How important is being agile?

Mark Cuban: You've got to be able to zig in that because, you know, if I'm competing with Lynn and her company and we happen to be in the same industry and I do something smart, then you have to adapt and you have to be agile and vice versa. If Lynn does something incredible, like we know she will, then I've got to be able to adapt and adjust. And so many times like now with CostPlusDrugs.com, we're competing against behemoths. And when you run with the elephants, there's the quick and the dead. So I've got to be quick to make sure that I can adapt and do things as they do things and try to actually stay ahead and make them respond to us, which fortunately we've been able to do.

Lynn Thoman: What does agile mean today with AI?

Mark Cuban: 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 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 partner. 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 and asking, 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.

One of the biggest challenges I had, and I think a lot of adults have, gets a little different, is you got to get comfortable talking to your AI. It takes a little bit to break down the barrier of having a conversation with artificial intelligence and 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 confident and comfortable in not hesitating to talk to them.

That's a lot of agility for people in the business world these days.

Lynn Thoman: I love that analogy of a sparring partner. What do you think is your biggest skill?

Mark Cuban: 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 time because someone would walk in and the minute they finished their pitch I knew exactly what business they were in and how things work. I can look at businesses that are in and as things evolve, whether it's the first day in, the first year in, fifth year in, I 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 understand what's going on in the world of healthcare because most people don't understand that it'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 how healthcare works.

Lynn Thoman: Can you give some other examples of how an industry works?

Mark Cuban: Sports. When I bought the Dallas Mavericks in 2000, everybody thought they were in the basketball business. And I would go to NBA board of governors meetings and they would talk about basketball, basketball, basketball.

I'm like, no, you don't understand. We are not in the basketball business. We are in the experience business.

You own teams and you couldn't remember the 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. It's the experiences that we have that gives people a reason to go to sporting events. And we had to understand that we were not in the basketball business.

We were in the experience business.

Lynn Thoman: I love that. That reminds me of Danny Meyers, 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.

Mark Cuban: 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 the 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 and the American people, because we all face so much stress and everything we do, even of our own making, just the people around us, the information we consume, the social media things that the algorithm finds for us and sends to us. It can be very stress inducing. And so I think one of the greatest skills and the focus that I try to bring is how can I reduce your stress?

And if you do that in business, you are reducing people's stress. And that's just a magical skill.

Lynn Thoman: And you're making them happy.

Mark Cuban: Yes, they go hand in hand, right? Less stress, bigger smile.

Lynn Thoman: So your parents didn't go to college. Your dad lost an eye working. How did you learn this skill to be able to understand businesses and what business they're actually in, which most people don't actually understand?

Mark Cuban: 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 one 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 Encyclopedia Britannica showed up at our house, you know, that was my requested birthday present.

I think that really pushed me. And it's the same today. And going back to AI, that's one of the beauties of AI, 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, you 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.

Lynn Thoman: I love your story about the Encyclopedia Britannica as a birthday present.

Mark Cuban: It's crazy.

Lynn Thoman: Before I ask you more about healthcare, you've said your parents taught you to be nice. Has that been an advantage in business?

Mark Cuban: Well, to be honest, I wasn't nice for a long time. My 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.

That'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.

Lynn Thoman: And how do you think about success today? And has that changed over time?

Mark Cuban: Yeah, it's obviously changed over time somewhat. Because when you're sleeping on the floor with five roommates, you have a different definition of success. When you come home and the lights are turned off, or you go out and your credit card's 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 smile, knowing that I can make today a good day. To me, even when I was broke, I was successful. I could put a smile on things.

And people say, you know, money by happiness. And what I've learned is, if you were happy when you were broke, you're gonna be really, really happy when you're rich. If you weren't so happy and didn't have a good attitude when you were broke, that doesn't automatically just go away because of your bank account.

Lynn Thoman: Cost Plus Drugs. Why did you create it?

Mark Cuban: I actually got a cold email from my current co-founder, Dr. Alex Oshmyansky. And what he said was, right now, in this day and age, there 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. And 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 that Pharma Bro was going to jail. And, 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, Daraprim, 750 percent? 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 day, people don't know what it costs for medications. They don't know what it costs for health care, unless they buy from costplusdrugs.com.

And so we decided to take a completely different approach. So that when you go to costplusdrugs.com, 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 percent.

And it's five dollars for shipping and handling and pharmacy fee. And because we only marked it at 15 percent, 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 email and the desire to help people.

Lynn Thoman: So the product you're really selling is transparency.

Mark Cuban: Transparency, but more so that leads to trust. I 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. To mark up a product only 15 percent when others are marking it up 100, 200, 500, 1,000 percent, that shows that we have self-interest, but we're not going to steal or cheat you. And that's what builds trust.

And when we were first getting started, a lot of the people we were bringing in, well, what are you doing for marketing? How are you marketing the company? I'm like, we're not.

Like what? How are we going to get people to buy from us? When you save someone thousands of dollars on their cancer medication, they're going to tell everybody.

And so trust comes from being transparent, showing people you have their interests at heart as much as your own, and then they'll trust you. And when they trust you, people want to do business with people they trust, and they'll tell others as well.

Lynn Thoman: And you don't sell people's medication information to 500 or 1,000 partners.

Mark Cuban: No, none of that. No, no, none of that.

Lynn Thoman: Like everybody else does.

Mark Cuban: Yeah, we make our 15 percent and that's it. We build other businesses. We have a wholesale business that we sell to hospitals and clinics because they're just as bad at buying medications 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 trailer that we can ship to a research center. So if somebody, you hear all these stories all the time about somebody has a disease and they're one of 15 people in the world and they raise a lot of money to try to help them, and 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 literally the tractor trailer size thing. And we cut the time from six months to four or five months.

But more importantly, we've cut the price of manufacturing that therapy for that really rare disease from half a million to a million to 50,000 to 100,000. And because you can also ship that trailer to that research location, they can iterate more often and improve the chances of helping the patient.

Lynn Thoman: Mark, thank you so much. And thank you for inspiring so many entrepreneurs on Shark Tank and also for starting Cost Plus Drugs.

Mark Cuban: Thank you.

Lynn Thoman: Join us next time for part two of our conversation with Mark Cuban.

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I'm Lynn Thoman, and this is 3 Takeaways. Thanks for listening.

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This transcript was auto-generated. Please forgive any errors.