John Sculley is often thought of as one of the best CEOs of the late 20thcentury, a leader of Apple and Pepsi. But in his second career as a super-angel investor, he’s having arguably as much influence today – though quietly — through his investments in startups including Zeta Global and Rx Advance.
His entrepreneurial bets – he often helps establish companies that need big cash to start – is drawing attention as some of those headline-shy companies are breaking into the spotlight by dint of their sheer size.
Sculley was the CEO of Apple for 10 years, credited with the financial turnaround that grew the company to $8 billion in revenue (He also famously clashed with Jobs). Before Apple, he was the CEO of Pepsi, credited with the Pepsi Challenge – which changed a Coke-centric market into a duel.
But his CEO days were nearly 30 years ago now. His second career as a super investor has spanned a longer time. He says he is actively involved in about eight companies through a family office he runs with his wife, Diane Sculley. Among those, according to our interview and his LinkedIn profile, are Zeta Interactive, RxAdvance, Celularity, PeopleTicker, Lantern Credit and FlexPharma. Marketing platform Zeta Global, which works with about 1,000 large companies as clients, has one of the largest data sets in the country, behind Google and Facebook, Sculley says. Zeta looks at data from about 2.5 billion users whose information hits Zeta’s platform every month via publishing companies. Its data footprint is larger than LinkedIn’s, according to Sculley.
Pharmacy benefits manager RxAdvance’s revenue exploded between 2017 and 2018, from $500 million to $10 billion.
And Celularity, a cell therapeutics company, is an example of his influence: As vice chairman, he says, he helped raise the $250 million the company needed to start.
We talked a few weeks ago about entrepreneurial success, about companies’ responsibilities in the age of data, about how he identifies super-star entrepreneurs (the surprising answer is that he doesn’t) and about his age, and a little bit about those well-traveled subjects, Steve Jobs and Bill Gates.
I’m interested now in the question of the role businesses play in a society grappling with twin crises in capitalism and democracy. Capitalism itself seems at a turning point, burning too many resources and steering too much money to the people at the top. Blackstone CEO Larry Fink’s call for companies to adopt a purposeis a sign that many leaders are re-thinking the role of business.
Meanwhile, democracy – one of the ways capitalism is governed — is being undermined by one of the unintended consequences of technology: the blurred lines between truths and lies.
We talked about the inevitability of change, the importance of relevance, the power of entrepreneurship, and about the difference between operating ethically and having a noble cause.
How do you decide which companies to invest in?
Our principle sector is healthcare, though Zeta Global, a company that I started a couple years ago, is doing fabulously well. We’re well-known in our sectors, so people bring us deals. We only invest with people we like. We often co-found the companies. Some of our companies are into multi-billion-dollar valuations and just wonderful people to get to work with.
How do you identify the entrepreneurs who have this moonshot chance?
Diane is a computer scientist and a mathematician, so she’s very technical. She’s also very good at identifying people she thinks have the people skills to recruit talent, the ability to articulate their vision and the ability to grow an organization.”
She can see when someone will be good from one stage to another. She’s very good at those things. And she oversees the administration of what we do.
And your role?
My focus is on working on a daily basis with the entrepreneur CEOs of these companies. And we’re always looking for serial entrepreneurs. People who have done things before.
Are there common mistakes and common things you say to them to get them over some mental hurdles? I’ve read what Steve Jobs wrote to you after your first year at Apple: “Year One. In the first half, we changed. In the second, we changed the industry.”
If you’re going to be an entrepreneur, the types of talents you have change at each stage of a growing company.
Giant corporations have a culture that is pretty similar to what it was five years ago and five years from now it may be similar to what it is today. That’s not true at all for entrepreneurial companies. … Entrepreneurial companies have to change, to take on the problems that larger-capitalized companies can’t solve.
It just takes a different outlook on life that starts with a great, insatiable curiosity. It requires a huge commitment to working hard and learning how to turn curiosity into observable insights.
Is there a process for producing business insights?
I was on the advisory board of MIT’s Media Lab for 17 years. One of the professors there who was well known in the tech world, he’s since died, was Professor Marvin Minsky. Marvin is looked at as one of the fathers of artificial intelligence. He said something so profound it stuck with me for over 30 years. He said, “You don’t really understand something well unless you understand it more than one way.”
That’s interesting, and deceptively simple.
Steve Jobs and Bill Gates had an uncanny ability to look at the same facts that everybody else had and see them differently. They saw Moore’s Law, which held that computers were going to get more and more powerful. Steve said no, the future is not about big machines, the future is about the power in non-technical people and giving them incredible tools that they can to do creative things.
Bill Gates had a comparable view that he called the noble cause. Bill says that he wanted to empower every individual to be able to own or use their own personal computers. Before Bill, software was given away for free, nobody was charged for it. Profits were all made from selling the iron. Bill invented shrink-wrapped software.
You’ve asked the question previously: How are Facebook, Google, and Amazon thinking about their unprecedented power? In today’s context, and given your power as an investor, how do you think about yourpower?
I don’t think I have a lot of power. My focus is thinking about where things will go next. Take healthcare. One of the things we saw in the high-tech world was that the whole industry shifted from the institutions being the top of the hierarchy to people being the top of the hierarchy. The same thing is going to happen in healthcare. The big difference is that the healthcare industry is many, many times larger than the computer industry.
Back in the 80s, the computer industry in total was less than $100 billion. The healthcare industry today is $3.6 trillion, just in the United States. What will it mean when Amazon, Apple, Google and Microsoft all move into the healthcare industry? It has already started. Are they going to do it the same way? Why will one do it one way, and another will do it a different way? How does it tie back to their cultures? How does it tie back to the talent pool they have? How does it fit into their overall vision for their corporations before they ever got the healthcare? That’s what I think about. But I don’t think of myself as having that much power.
You’ve built huge companies with data backbones. When you talk to your entrepreneurs, what do you say to them about how to grapple with the ethical issues around data?
Everything I do is around the efficient architecture of platforms. The healthcare industry is still in the early days of adopting cloud platforms. Our cloud platform company is called RxAdvance. We’re a modern pharmacy benefit manager company, that manages prescription drugs. It has a huge impact on the consumer prices for prescription drugs. We’re five years old, but last year we did $10 billion of contracted revenue. I hope we’ll double that this year.
We’re one of the fastest growing, largest start-ups ever. In five years to have those kinds of numbers, yet we’re just a little tiny company. When you look at $3.6 trillion, the question is are we having much impact yet on changing the healthcare industry? Well, we think we will, but it’s still in the very early days.
How do we create companies that see themselves as having a responsibility in society? Or is their only responsibility to growth, and to shareholders?
What will capitalism be in the future, because capitalism is so skewed towards the 1%? You can’t have a world where there’s so much concentration of wealth in such a small part of the population. The problem with capitalism is going to be solved by the private companies. Rarely does innovation come out of government. Maybe the only innovation that came out of government was the founding fathers creating the Constitution.
Governments are there to respond to questions like is an industry playing fair, are they paying their taxes, are we providing services that society ought to have? The question of what is a privilege and what is a right is up to the political parties and the politicians to figure out.
The reality is there’s a lot for the private sector to do, and it’s going to happen primarily with the entrepreneurial companies. Entrepreneurial companies build their ethics and their cultures right from the start. What are your moral principles and, why are you creating this business? It isn’t just about making money. I like making money, but people need to have purpose-driven lives.
Entrepreneurs speak about those things. People who work at big corporations are so far removed from what the founders’ ideas. They think about: How do I fit into the organization? How is work approved and budgets allocated?
In an entrepreneurial company you actually touching with your hand and in your daily life, everything that goes on and determines whether that business is going to grow and be successful. Ethics and a purpose-driven workforce and a noble cause, hopefully. Not every business can have a noble clause, but those that can have a huge advantage. Those are the thing that entrepreneurs think about.
Is one of the purposes of an entrepreneurial venture to create jobs?
Yes. But I want to create really good jobs, so I’m not interested in businesses that are creating call center jobs. I’m interested in jobs that give people the tools to be able to up-skill themselves or to re-skill themselves into different types of jobs.
You’ve been close to many of the great technological inventions in recent decades. That’s cool.
I was giving a talk at Harvard Business School on the Pepsi Challenge in 1978. A student came up to me afterward and said, “John, I want to show you something. He took me into another building into a room, and then I saw the first Apple II computer I’d ever seen. This was before Steve Wozniak had invented the floppy disc drive, so it had a tape recorder next to it. The student boots it up and you see a bunch of rows and columns. I said, “That’s pretty cool, what do you call it?” He said, “I call it a spreadsheet. I created it so I could model alternatives for Pepsi vs Coke.” I said, “Wow that’s really cool.”
His name is Dan Bricklin, and he joined together with a colleague from MIT named Bob Frankston and they founded a company with another guy named Dan Fylstra called VisiCorp. They created the very first electronic spreadsheet in the world. When it became commercial, I was CEO of Pepsi. I went and bought Apple II computers for every Pepsi bottler in the United States, but I told them they had to burn off the costs of them by sending me a floppy disc every week of their sales reports. Normally it took us some months to get sales reports, but then I got it in a week, which was really valuable to us.
There really was a world before personal computers.
Since I saw the birth of the first electronic spreadsheet, and since I’m part of acquiring the first electronic presentation application, called PowerPoint, that we later sold to Microsoft, I have first-hand memories of how these tools in the 1980s became so impactful in people’s life. Now I’m deeply involved in machine learning, and I think that the kinds of tools that are going to come out of machine learning, augmented realities are going to be really big. You know what augmented reality is?
Not really, I suppose. Or I don’t understand the breadth of what that phrase means.
You know Waze, right? An Israeli company that Google bought a few years ago. It’s augmented reality. You’ll have it on your smartphone, or you’ll have it on your watch, you’ll have it on Airbuds or something like that, and it will be able to augment your knowledge, like it’s always there as an assistant who can help you as you’re trying to solve a problem or do a task, things like that. There will be a different, faster way of learning and studying books, and going to classes.
It’s interested that you bring up Waze, because it points to one of the things I’m so worried about in the world of AI. I know one place that for sure where Waze doesn’t work, which is Palestine. If you drive across into the West Bank, Waze doesn’t work. But the frame of the conversation has been set to look at all the things augmented reality can do, rather than the people that are left behind.
That’s very unfair, it’s extremely unfair. Life isn’t fair. It’s extremely unfair the Chinese government uses social media as a surveillance control over the population. We use social media, and we have no control over it. It’s out of control. I think it’s incredibly dangerous, because it’s destroying democracy, because people lie, and you can’t tell the lies from the truth. People have figured out how to manipulate the unintended consequences of social media.
Would it be better to regulate social media and make it a completely different business model? These are questions that will have to be figured out by society, and different parts of the world will come up with different conclusions.
I agree with you that entrepreneurial companies are one of the best places for the good decisions to happen, because they are by nature open to changing the frame.
I’ll give you one other perspective. Had you ever heard of Zeta Global before we set up this interview?
I had not. I looked it up.
The data footprint is comparable to Facebook and Google in the United States? Our company is a relatively unknown company unless you’re specific in the world of personalized marketing. We serve over 200 million people in the United States, which is very comparable to Google and Facebook, and actually significantly higher than LinkedIn.
Zeta Global is working at a massive scale with artificial intelligence. We don’t sell data. We’re not like Facebook or Google; we only take data dips into the data and we have about a thousand really large clients, largely in the United States. We’re doing about a trillion plus monthly signals in the data science world. We have about 2,500 data elements per user, and we do about 2.5 billion unique users per month, yet you’ve never heard of the company.
It’s like Palantir. Palantir didn’t do anything to publicize themselves, but they’re a giant company working on security issues, contracts with the government, and often it’s highly classified. So there are entrepreneurial companies like Palantir that the general public just has never heard of, in any case, if they are some of the most successful companies in data science and machine marketing.
And are they actors for good in the world?
I don’t know enough about Palantir because it’s so secretive. I wouldn’t define Zeta Global around our noble cause. But there have to be alternative ways of marketing to people in ways that aren’t violating their privacy. Many marketing services sell data on people, and we don’t sell data. We keep the data totally confidential, but we use the data.
We have large clients, by that I mean we have contracts that are between $20-$50 million dollars a year. We’re in the financial service industry, and insurance, travel and hospitality, and health communications, and consumer packaged goods. But what differentiates us is we’re not selling data on people to other companies, as let’s face it, Facebook is highly criticized for doing.
Interesting point. There is a difference between having a noble cause and operating within guardrails. It’s fantastic to have the former. Everybody needs the latter.
I really believe companies should have guardrails, particularly in the world of personalized data. I think what’s going on with Facebook is scary. And these aren’t bad people, they don’t say how can we create an evil company. But sometimes those unintended consequences become incredibly impactful in society.
OK, here’s my last question. If you were going to change the perception of aging in our culture, how would you do it?
I’m living it. I’m 80 years old, I don’t know anyone else who is 80 years old that works like I do, and I love it. I do it largely because I enjoy working with entrepreneurs building big businesses.
Because we only deal with a small number of companies, they have to be ones that have the chance to go to very large companies. There’s where I can help the most, because I can open doors.
