“Entrepreneurs Are the New Rock Stars”: A Conversation with J.B. Pritzker and Howard Tullman

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Transcript

Planet Lex: The Northwestern Pritzker School of Law Podcast

“Entrepreneurs Are the New Rock Stars”: A Conversation with J.B. Pritzker and Howard Tullman

05/22/2017

[Music]

Intro: Welcome to Planet Lex: The Podcast of Northwestern Pritzker School of Law, with your host Dean Daniel B. Rodriguez, bringing it to you from Chicago, Illinois. Take it away Dan.

Daniel B. Rodriguez: Hello and welcome to Northwestern Law’s Planet Lex, podcasting from the Northwestern Pritzker School of Law in Chicago, Illinois. My name is Dan Rodriguez, your host. Hope you enjoyed our lead in music.

It’s a special privilege and pleasure to have join me today two heroes of mine, Howard Tullman and J.B. Pritzker to talk about entrepreneurship, the intersection of law, business, and technology, whatever is on their mind.

If I gave them just introductions we wouldn’t have time for the conversation, so I will keep it short and sweet. Howard Tullman is the CEO of Chicago’s High Tech Incubator 1871, as well as the Manager Partner for two Chicago-based early stage venture capital funds, Chicago High Tech Investment Partners, LLC and G2T3V, LLC.

He is a serial entrepreneur, having launched more than a dozen technology startups over a career spanning five decades.

He was Chairman and CEO of Tribeca Flashpoint College, which he cofounded in 2007 and is a former President of Kendall College. He is, I am delighted to report, an alum of our Law School, having graduated 1970.

J.B. Pritzker is the Founder of the Pritzker Group, which includes private capital, venture capital, and asset management teams. He is a 1993 graduate of the Northwestern Law School.

J.B. and his wife M.K. are incredible philanthropists and supporters, with not only their money, but their energy and time throughout Chicago and elsewhere, in matters including early childhood development, justice in the criminal justice system. And of course, J.B. and M.K. made a record breaking donation to the Law School that now bares his family’s name. And earlier this year he announced his candidacy for Governor of Illinois.

J.B. and Howard, thank you for joining me today.

First of all, a word of congratulations! Your 1871 celebrated, I think just now, or is about to celebrate it’s 5 year anniversary, which I suppose is extraordinary time in this space. Can you talk to us a little bit about that?

Howard Tullman: Sure. Well, first, I am required by President Shapiro to say I am a Double Purple, so I am also a Northwestern undergraduate alum.

Daniel B. Rodriguez: Duly recorded.

Howard Tullman: Okay. Good. Really tomorrow night is the 5 years celebration of 1871. It started in May of 2012, founded by J.B. and it has grown dramatically. We are excited to celebrate five years really. We started with about 50 companies and about 50,000 square feet; today we have about 500 companies and about 160,000 square feet. Graduated several 100 companies, raised several 100 million dollars and created almost 8,000 jobs, which is really the singly most important thing.

The second most important thing is we are the number one ranked Incubator in North America, and we have really put the city and the state, we think, on the technology map globally.

Daniel B. Rodriguez: J.B., you were instrumental, to put it mildly, in starting this venture and supporting it. Why did you do it and are you pleased five years after the fact about your investment?

J.B. Pritzker: Well, I will say that when I started putting together 1871, it was really following a number of other developments in the technology ecosystem in Chicago that I had been involved in. There are a lot of components in helping startup companies get going. One of them of course is the availability of capital. One of them is mentors. One of them is customers and so on. And in many cities those things don’t get organized for startups, but in Chicago we started doing that a decade before 1871 got going.

But one thing that was missing in 2010, 2011, 2012, as we were putting 1871 together, was a place for entrepreneurs to go, to learn from each other, to access educational resources, so that they could advance their businesses in ways that they didn’t already know how, to have mentors available to them, to have capital available, all in one place.

And there are places around the country that have successfully done this. There’s the Cambridge Innovation Center in Cambridge, Massachusetts and Plug and Play in California, and MaRS up in Canada. But there was nothing like it in Chicago, and I felt that we could if we put our heads together, the leaders in the tech community, we could build something that was going to be second to none and would be uniquely Chicago. And so that’s how we started.

Collaboratively, I had a plan. It was written on a napkin when I started, and that’s how I think a lot of great thing get started, but if you get the right people around the table, you can build something really terrific, and you have seen that here we are five years later. I know that Chicago has been listed as one of the top 10 startup ecosystems in the world.

(00:04:57)

Daniel B. Rodriguez: I want to come back to the uniquely Chicago part, but before I do that, many of our listeners, their association with something like an incubator may be from episodes of ‘Silicon Valley’, big house, a couch, a kitchen, so there’s more to the story than that I suspect. So can you tell us a little bit about what happens in sort of a day or a week in the life of 1871?

Howard Tullman: Sure. Just to give you a scale, we have about the 2,000 people a day coming to 1871. About 20,000 people a month. In addition to the member companies, all the major universities are represented there. We have nine schools, vocational schools in coding and design in UI/UX. We have about eight incubators within 1871. So we think of ourselves as sort of a mega incubator.

And in within that are domains specific incubators in real estate and education and retail and IoT, all these various areas. And then because we are a nonprofit we have the luxury of also having incubators focused on Hispanic entrepreneurs, on veteran entrepreneurs, on women entrepreneurs, tremendously diverse place, about 35% diverse, and that’s been a central objective and concern of ours.

Internationally we work with about a dozen countries to bring startups to Chicago to really explain to them that this is the place in the country to launch, because as J.B. said, you can have capital, you can have talent, but customers are really important, and frankly, we have more customers in the Midwest and in Chicago in particular than you will see on either coast.

And so what goes on everyday, in addition to what I have described, we have six venture firms, so of course capital is available, but it’s the matchmaking and the networking and sort of the serendipitous collisions, the accidents. This is where innovation occurs, always at the edges.

And one of the inspirations of 1871, and J.B. can share this with you, as they looked around the country, there weren’t very many buildings in the world frankly that had floor plates that would permit you to have a massive contiguous space. In New York you would be on six stories, and if you have to get on an elevator, you might as well be in a different country.

So the thought that you could have a floor plan with this kind of size and scale and have all these people constantly mixing and matching and exchanging ideas was really special and it’s what made 1871 super successful.

Daniel B. Rodriguez: So let’s talk a little bit more about what’s uniquely Chicago. Needless to say, Silicon Valley on the West Coast and Manhattan on the East Coast cast a very high shadow, large shadow over the entrepreneurship ecosystem in the United States. So what is the comparative advantage of Chicago and Illinois in that place?

J.B. Pritzker: Well, remember that Chicago is one of the great college towns in the world. We have more universities in our city than almost anywhere else. And so you start with these great educational resources, though they are separate from one another, University of Chicago and Northwestern and Columbia College and DePaul and so on, they are separate institutions, and sometimes they don’t talk to one another as well as we all would like. But if you could bring them together in a location and bring all of their unique talents, in each place they have got programs they are unique and interesting and different, and if you could bring those to bear for the startups and the new founders, they could be some of the best educated entrepreneurs in the country. So we have got that going for us.

And then you have got what I would describe, some people use the word Chicagoness, and it’s the unique fact of the Chicago business community and the Chicago community more broadly, and I would say this is across Illinois too, is that we are actually a well, tightly knit community that is pulling for each other.

We are one of the few places, I think cities in the world where the community is actually pulling for each other, and the idea that you could pull the resources that you need into one location and then have everybody kind of rooting for the entrepreneurs and helping them be successful, that’s hard to do. And yet, in Chicago it’s not that hard to do. So that’s a unique fact. And it’s more of a behavioral thing about Chicago than anything else. So that’s another thing.

And then finally, as Howard is alluding to, the space, and it’s not just that it’s on one floor, but that’s one factor of it, the space itself is designed especially to cater to the way entrepreneurs work. So what we wanted was for entrepreneurs to collaborate with one another, to make it easy for, if you know how to build the Facebook Widget and I am really good at coding this particular thing, but neither of the opposite of us has those skills, we could share those with one another. We are not competing with each other, we might have completely different businesses, and yet what a great resource to be able to walk down the hall to figure out something you don’t know already.

(00:09:50)

And then finally, the mentors; I just want to point out that we have one of the great mentorship programs in the world at 1871. You can walk in there and you will even see on a blackboard, of course it’s also online, for people to sign up, but you will see the names of some terrific resources at the great big companies and the most design-centric companies and so on around Chicago and around Illinois, on the board, and you can sign up to get mentorship time with those leaders to help you figure out the things you don’t already know.

Howard Tullman: Yeah, just to give you an idea on scale, 800 or 900 volunteer mentors, this year they will do 7,000 hours of one-on-one coaching. But to add to what J.B. said, the other three things that are really unique about Chicago and about this marketplace. First, the deals are better, because there’s less sort of competition.

Second of all, the workforce is more loyal and this is a huge issue. I mean, on the coasts, they can’t keep anybody, and jumping from position to position is a constant source of turmoil for businesses and keeps them from sort of growing in a scalable fashion.

And then lastly, it’s funny, but I used to say that the only thing a venture capitalist hated more than losing his money was doing it alone. It turns out that in Chicago the common activity is a number of these firms will get together and jointly back something; you can’t imagine how much crossover there is.

On the coasts, that’s a very rare thing. They just frankly want to do it themselves. Now, they may have the resources to do that, but that’s only part of the driver, the more important thing is this desire to, as J.B. said, to work together and to sort of boast the entire system to a newer height.

Daniel B. Rodriguez: Should we worry, or did the two of you worry about the challenges that are facing the state, the economy, the lack of a budget, pension crisis, the list goes on, issues of crime, I don’t sound like the welcome wagon for Chicago. So I just mean to say the challenges that are facing Illinois run great significant risks for the development of entrepreneurial activities in the community.

J.B. Pritzker: These risks loom large and it’s the reason frankly that I decided to run for Governor, but putting the politics aside, I want just to say that, entrepreneurs don’t much interact with government, and government can be a cheerleader, government can be a booster and can provide some capital too, as well as I believe we can do this all over the state, there’s mentorship and technical assistance and capital allocation to small businesses.

But the truth is that we do have really challenges here and we are going to overcome them. We are a state that has, what do they say, a city of big shoulders, we are a state of big shoulders and we I think have the capability to deal with those over the next couple of years.

Having said that, if you walk into 1871 or into the entrepreneurial ecosystem of Chicago, you will see that none of those headwinds are stopping our great entrepreneurs from building their businesses. They are heads down, focused, focused, focused, and making sure that they are doing all the things that are necessary to succeed.

I have been very proud of that fact, because I think guys like Howard Tullman, who has been at this for many years as an entrepreneur and now as a leader of the entrepreneurial community demonstrate that you can have real longevity as an entrepreneur in Chicago.

Daniel B. Rodriguez: We talk a lot here at our law school and certainly throughout this and other universities about the so-called entrepreneurial mindset. So I want to ask the two of you to say a bit about that. What characteristics define someone, be they a lawyer, a businessperson, a 19-year-old college student, et cetera having the so-called entrepreneurial mindset?

Howard Tullman: Well, I would say there are basically two things. First of all, there are five components that are absolutely clear. You have to be passionate about something. You have to be committed to doing something, that’s hard and it’s lonely. So number one is passion.

Number two is you have to do literally the hard work, the perspiration of wanting to do this. You have to spend the time to prepare, so preparation is critical. You have to have unbelievable perseverance, because it’s a bumpy, long, and hard road. And then you have to want to make a difference. You have to want to do something that is more than making money or doing this or that, you have to really want to make a contribution.

But what is interesting and it’s funny because when we talk about entrepreneurs at law school and in the context of law school, the law schools are still focused to a significant extent on the Gladiator Litigator Model, which is one person is going to be triumph. And frankly, the world is different today. The world is about collaboration and it’s about a different set of skills, team-based skills.

And so one of the things we work on tremendously at 1871 is how do you introduce these startups to the corporate world and how do you get that language to be translatable, because it’s very threatening to tell a corporation any of the words that we use to brag about our entrepreneurs; new is awful, innovative, all these things make for —

J.B. Pritzker: Disruption.

(00:15:07)

Howard Tullman: Right, all these things make for mistakes and problems and costs and retraining. So we, one of the principle functions of my team is that we help that matchmaking and we help that process. But I think the entrepreneurial mindset hasn’t changed, I think that everybody today is going to have to be an entrepreneur.

J.B. Pritzker: I will say though that having a law degree has been hugely helpful to me in building my business. I will step back one generation, where my father was an attorney and he built a motel business into a successful hotel business and many of the qualities of great entrepreneurs, an attorney helps to — I think the mindset of the law helps to kind of organize and drive an entrepreneurial spirit. So that there are a lot of people who have a desire and a need to go create, but may not be able to organize and head down a single road in order to get those things done, and I think having a law degree has been — was a huge benefit to him, certainly has been to me.

And I find I have a unique perspective by the way. When I am sitting in a room and we are trying to solve a problem, I am often the only attorney sitting in the room solving the business problem, and it is very frequent that something will dawn on me that doesn’t dawn on the rest of the crew in the room, and it has often to do with the ways in which you can fall off the guardrails, that you are trying to stay between the guardrails, but as an attorney you are constantly testing the hypothetical, what happens if — are we going to bust through the guardrail if this happens or that happens, I think it’s a way of thinking that you are taught.

And then finally, I can tell the difference between a great attorney that you want to hire for your entrepreneurial endeavor to represent you to write the documents, to help you do the next deal, a great attorney and a mediocre attorney. The great attorneys are the ones who think — they understand from the beginning you want to get from point A to point B. And as a businessperson you are not thinking, well, there’s a block in the middle and therefore I can’t get there. And many attorneys will often say point A to point B, no, there’s a big wall there, sorry you can’t do that, and that’s where they end, that’s how many attorneys are.

But great attorneys, and I think the ones that are graduating from Northwestern carry this characteristic, think about, no, no, if you can’t go in a straight line, and you can’t get through the wall, and maybe you can’t climb over the wall, maybe there’s a way to go around the wall, here are three other ways to get from A to B, and that as a businessperson is enormously valuable in an attorney, and I think that’s what Northwestern by the way is graduating.

Howard Tullman: Just to that point, I mean I think you don’t want to be the department of no; I think you want to basically be additive, and I think that the first year of law school, tremendously, tremendously valuable in terms of just cleaning up the way you think and the way you process information and the way you analyze things. That to me is something that for 50 years has basically served me extremely well. And when my daughters ask about that I say, the first year, I would be willing to have them go to the first year law school, second and third year, if you are on law review, it’s a different experience.

Daniel B. Rodriguez: That’s where the controversy is.

Howard Tullman: That’s where the controversy is. But I think that the law schools are going to have to change, and I think it’s exciting that Northwestern is doing as much and again, J.B., a portion of his gift was to really build out the whole entrepreneurial endeavors at the law school and that’s super exciting to us.

Daniel B. Rodriguez: Well, just on that point, and this harkens back to the introduction, as I mentioned at  the outset, that J.B. and M.K. have been so supportive of a number of endeavors in the community, and I get ask the question, so I will ask it directly to you is, what explains this combination of a tremendous contribution, a gift that supports on the one hand an extraordinary range of entrepreneurship endeavors and activities, work at the intersection of law, business, and technology and the wonderful work of the Donald Pritzker Entrepreneurship Law Center, on the one hand, but on the other hand a number of contributions to social justice endeavors.

It will be tempting to say, well, there are two separate goals, and there’s one goal about entrepreneurship and another goal by social justice. But in our conversations I have really been struck by the way in which you have articulated the connection between the two, and even in this conversation, entrepreneurship contributes not only to wealth and economic activity, as important as that is, but to justice reform and justice considerations. Am I correct?

J.B. Pritzker: Yeah, and I would — I guess I am stepping back and trying to psychologically examine myself, it’s a hard thing to do, but I will say that the connection between those things, at least for me, is that I think it’s a worthwhile endeavor to try to change the world, to make it a better place, and I think many entrepreneurs are trying to do that with their business endeavor. They are inventing things or building things that truly will advance humanity.

(00:20:09)

And it’s also true that social ventures and thinking about how to get criminal justice reform and better justice in the world for people, whether that’s in legal terms or others, those things are related to me. And so yeah, focusing on the Center on Wrongful Convictions, focusing on immigrant rights, focusing on making sure that we are an expansive law school that’s focused on expanding people’s rights, I think that’s — the law is never going to go away, it evolves all the time, and hopefully it’s evolving in ways that are focused on making peoples’ lives better.

Howard Tullman: Let me just say on that score, this arises in 1871 when we say that there is no effective innovation without inclusion, and people say, well, why are you interested in diversity, is it just because it’s a good thing to do? The truth is it’s completely selfish, you get better ideas, you get broader thinking.

I always harken back to the early airbags, which killed a lot of women and children, because they only used one dummy and it was 5’9” man, and guess what, if a woman would have been in the room, they might have had a different mindset, they might have asked different questions.

Daniel B. Rodriguez: Like the reasonable man standing.

Howard Tullman: Exactly right, exactly right. So we do these things, and I think that you alluded to this before, our issue is we want people moving back to Chicago too. For the startups, it’s not the new graduate that’s the critical person, it’s somebody three to six years out. We want engineers who have gone to the Valley, or gone to any coast for a couple of years to say, I want to raise my family, I want to build my life in a place where the standard of living is manageable, where it’s a real community, all of these things, and that’s what we are addressing in terms of trying to be welcoming to just about every kind of population.

Daniel B. Rodriguez: We talked about the law school a little bit and Howard, you have had, among your many careers, you have been a destabilizer in higher education, and I mean that in a complimentary sense. So can both of you take a step back and sort of — and of course J.B. and your work in early childhood development, so both of you have been involved in education and have looked at education, in addition to being educators yourselves, what is higher education doing successfully, not so successfully, what would be kind of a template for really improving the way in which we are educating the next generation of, not only lawyers, but college graduates, entrepreneurs, business folks?

Howard Tullman: Well, first of all, I think higher education is doing virtually nothing successfully.

Daniel B. Rodriguez: Okay, speak candidly, just among friends.

Howard Tullman: Look, I think that to the extent that we are still teaching people to memorize anything when we can Google everything, we are using yesterday’s skills. When information was scarce you had to remember things, when you can do research, it’s a different world.

So I think we have to teach a new set of skills, problem solving. I mean a lot of what you learn in the first year of law school are these powerful skills, but I think in terms of education in general, we just have to try and train a group of people to be adaptive and flexible and to take on problems and come up with new solutions, and it starts in the high schools. But by the way, I don’t think it’s just education, I think if we don’t have a strategy for upskilling people who are 50 and up in every major corporation in the world, those people are screwed, because it’s not like they are going to retire at 60, they are going to be in the workforce for 20 years more and we don’t have a plan to make them valuable contributors.

J.B. Pritzker: I mean that’s a real focus of mine, on lifelong learning, because what Howard is describing is technology has made the need to acquire knowledge necessary at every moment of your life. It is not true anymore that you can graduate with a degree and whatever it is that you learned in school is enough for your entire career, it’s just no longer true. And that is going to be a bigger and bigger challenge, unless we meet the challenge by doing, as Howard is describing, giving people the opportunity to improve their skills as they go. Every decade of your life you are going to have to figure out how to interact with the technology that’s being developed, because it’s being developed faster and faster.

And the world is just going to change. What it is that we do with our lives every single day at our work is going to change. So we can’t stop and I think we have not yet figured out that learning doesn’t begin at age 5, it actually begins right out of the womb, as your brain is beginning to develop, and 85% of all your brain development is in those first five years, so let’s not forget those five years, which are probably the most critical of any in your life.

(00:24:55)

So start at 0, help parents be better parents, and help create better educational institutions and more, so that every child gets preschool, every child has access to quality childcare, and then after college, after you are 22 it doesn’t stop, you are going really for your entire life.

Daniel B. Rodriguez: Do you think it’s — I assume you believe it’s not a coincidence that some of the most remarkable innovations are happening outside of the traditional educational sector, you think of the development of the Khan Academy and other ventures, right, as a result of philanthropy, as a result of entrepreneurship.

J.B. Pritzker: Well, it’s just horrible that kids say that the most boring place they go is school, this is crazy. I mean, when you go to a school, I am teaching at a ninth grade class now at Dyett High School, and when you go there the kids with the lights on are the kids who are doing anything but core; in other words, the kids in robotics, the kids in music, the kids in the entrepreneurship course. We have to figure out how to make schools something that kids can be proud of.

And what I love is that entrepreneurs are the new rock stars, frankly smart is the new handsome, and it’s cool, especially because now the jocks and the rock stars also want to be entrepreneurs. So it’s coming our way. We have a unique opportunity, but we have to seize it.

Howard Tullman: Innovation is the key in education, in work, in all of the moments of your life. We are now really all going to be innovators at every moment.

Daniel B. Rodriguez: And the destabilization really has to come from self-interest, from the college and universities, and it’s the declaration against interest, but one of the challenges we face is the business model of higher education is skewed in favor of business as usual, particularly quite frankly among the most successful universities. Universities like ours that have been prospering with a basic model that says, if you build it, they will come. Now, that’s starting to, as we know in legal education, take a turn, but —

Howard Tullman: Well, you know Dan, there’s a different thing that’s really important, and that’s to understand how tiny a population you are talking about. I mean Morty talks about the top 30 expensive colleges or whatever, that’s a tiny portion of the world, tiny portion of the workforce. We have to have a solution that’s broader than that.

I mean it’s great that they are resting on their laurels and that they can attract the class, but that’s not going to impact the bigger picture, and so we have to democratize and sort of spread education, and that’s what really Khan does. Khan is really a strategy for saying you are going to learn half of what you learn in your entire life outside of any classroom.

And at 1871, what we are so excited about is the lateral learning. You heard J.B. say this guy is a coder and this guy is a marketer or something, but the amazing thing is how quickly technology jumps from industry to industry. And you will never see that in your basement, you will only see it in a place where it’s happening all around you every single day.

Daniel B. Rodriguez: Let me ask you one last question, of course it’s an impossibly broad question, and that is how does our political system, and I will let the two of you define that political system in any way you wish, help advance or obstruct all of this exciting entrepreneurship activity, whether in Chicago or throughout the region or throughout the country?

J.B. Pritzker: Well, government is often three steps behind the best entrepreneurs, let’s start with that. Innovation is not a word you hear from people in government much. So we need to bring it into government, in the sense that we need the kind of thinking that allows for an understanding of where the private sector is going, not because the government needs to constantly be about regulating it, but because the government shouldn’t be about obstructing progress. That’s one point I would make.

I think government also plays an important role, because there are innovations in technology that we do need to regulate. You have got today drones with cameras on them and they are invading people’s privacy and we don’t have a lot of rules around the country. By the way, what about driverless vehicles, the laws that have been developed are still quite nascent, when driverless vehicles come about, and by the way, there are going to be driverless trucks. How are we going to manage that? Do we need people involved? Do we need to require that there’s a truck driver, even though they are not driving, in a driverless vehicle?

But making sure that we are — that safety concern for our workers is a top priority as we develop these new technologies. So I think there aren’t many people in government today that are really thinking about the future much, and we need more of that.

Howard Tullman: My only closing comment would be to — from the medical profession, which is as long as they don’t do more harm, we are perfectly happy to let the government just sort of be on its own and sort of innovate around them. I think honestly that’s where the future lies until we get some people in government that actually know what’s going on and want to make change happen.

Daniel B. Rodriguez: Great. I want to thank both of you for taking time out of your busy schedules to join me and join us. I hope we will have the occasion down the road, soon down the road to talk again.

J.B. Pritzker: Thank you.

Daniel B. Rodriguez: Well, that’s our show for today, great conversation. I want to thank Howard Tullman and J.B. Pritzker for joining us this morning. Thank you for listening. I am Dan Rodriguez, signing off from the Northwestern Pritzker School of Law.

[Music]

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