How to Discover Joy in Your Work from Successful Entrepreneurs

Michael Fertik on Risk, Reputation, and Raising Entrepreneurial Kids
In this captivating On The Homefront episode, Jeff Dudan sits down with Michael Fertik, founder of Reputation.com, AI investor, and venture capitalist behind Heroic Ventures. What begins as a light-hearted conversation turns into a masterclass in resilience, entrepreneurship, and the modern intersection of privacy, reputation, and artificial intelligence.
Fertik shares unfiltered insights about growing up on the edge of Manhattan’s gritty Upper West Side, running a candy arbitrage hustle in fourth grade, and eventually launching one of the first online privacy companies. He opens up about his autodidact filmmaker father, Velcro inventions, raising global kids in Paris, and what venture capital really looks like behind the scenes.
This episode is a goldmine for anyone building something from nothing — especially founders navigating AI, parenting, risk, and what it means to “have guts” in the modern economy.
Key Takeaways
- Entrepreneurship starts young: Michael’s first business was selling candy to wealthy classmates too afraid to walk to the bodega — a lesson in friction, arbitrage, and the power of demand.
- Expose your kids early: Blurring the line between work and life helps children think entrepreneurially and develop real-world decision-making skills.
- AI vs. ML, demystified: Machine learning identifies patterns in data; artificial intelligence goes further, offering insights, completing complex tasks, and asking novel questions humans may miss.
- Reputation is currency: Fertik pioneered reputation management online, helping individuals and companies regain control in a digital world of big data and misinformation.
- Venture capital isn’t for everyone: Most businesses don’t need VC funding. Michael breaks down when it makes sense — and why product-market fit is too late for him to invest.
- “Have guts.”: Fertik’s life advice boils down to two words — the courage to do hard things, whether raising kids, pivoting careers, or launching in uncertain times.
Featured Quote
“The people who find a way are the people who win. Whether it's the bathroom floor at 4 a.m. or a closet, they just find a way.”
TRANSCRIPT
The Candy Hustle: Michael Fertik’s Entrepreneurial Origin Story
Jeff Dudan (00:00.362)
before we officially get started. How do you know Jason Greer?
Michael Fertik (00:02.442)
Okay.
Michael Fertik (00:05.769)
He used to work for me, but I wouldn't want to talk about it on the record about him, but he's lovely. He's a friend of mine and we used to work together.
Jeff Dudan (00:13.662)
Yeah, no, I just I was just I know him. Chad has you met Chad his brother?
Michael Fertik (00:19.901)
No, I've never met Chad. I've met his wife. I've met, I think, three of those five kids.
Jeff Dudan (00:23.851)
Nyla.
Yeah. And then they've got, um, uh, one kid with the, um,
the health situation, what was this?
Michael Fertik (00:37.869)
She has, she's got, she's got some, she's got some.
Jeff Dudan (00:41.868)
Yeah.
Michael Fertik (00:42.165)
sort of chronic challenges, I think. But he's a friend of mine. And we used to work together, and now we become friends, yeah.
Jeff Dudan (00:47.33)
Cool.
Nice. Yeah. So I coached with this brother, Chad. I know. I think, I think Jason went to NC State. I think it was a lineman or something. Big guy.
Michael Fertik (00:57.569)
Yeah, big football family. I think one of his nephew used to play for the local NFL club. But I don't know if that's still true. Yeah.
Jeff Dudan (01:06.302)
Yeah, Will, Will Grew. Well, cool. Well, um,
Michael Fertik (01:11.539)
And he's got a son who plays hockey, pretty seriously hockey, you know.
Jeff Dudan (01:15.626)
Yeah, I wouldn't Jason. I mean, I've just met him once or twice. So we're not we're not friends or anything like that. But I just I was more close with his brother. Well, cool. Well, Michael, how are you on time today?
Okay. And is there anything in particular you're looking to talk more about or promote?
Michael Fertik (01:36.685)
No, I don't know where your show roles, nothing's off limits for me. I mean, where I can just say live, I'd rather not talk about that. I'm a big boy, I'm happy to do it. But yeah, I'm happy to roll with you. I think you wanna talk about business and so forth, but we can talk about family, we can talk about business, we can talk about religion, we can talk about politics, we can go wherever you want.
Jeff Dudan (02:01.294)
All right. I tell you, so the show, the theme of the show, so we're one of North America's fastest growing franchise organizations. So a lot of what we do is just like the hero's journey. So I mean, I love to spend five or 10 minutes at the beginning. I know you went to Harvard. I don't know where you grew up. I did run through the reputation economy, although the book didn't come out last year. So.
Michael Fertik (02:11.925)
Yeah, yeah, that's what I read, yeah.
Jeff Dudan (02:29.526)
There's probably a lot of stuff in there that a lot of the stuff I saw online you doing was more content over the last couple of years has been more contemporary around heroic ventures and a lot of this interesting stuff with AI and, and scammers and reputation and security and all that. So yeah, that's all interesting. But man, when I, I I'll just kick it off and kick it over to you and talk a little.
Michael Fertik (02:45.609)
All that, all that, here we go.
Michael Fertik (02:52.429)
By the way, congratulations on the franchises. I, you know, not a lot of guys from tech as I am talk about franchises. I think I have spent probably myself 40 hours over the last few years, let's say five years researching franchises, getting as close as trying to fund a pal of mine in his hauling, like a garbage hauling franchise business with a view to kind of
helping him take over more territories and stuff. I couldn't quite, I didn't feel I had the expertise to make it hunt for myself on paper. But I think that if you're able to make that franchise world work for you, and I'm not an expert, you are, I think it's not just wonderful, it's a good employer, it's good for your community, it's really good as a long-term business. I envy that, and I hope one day.
Jeff Dudan (03:30.027)
Yeah.
Michael Fertik (03:49.101)
to be able to get involved in that field because it would be a great way for me to diversify as well for my family. I just haven't been able to manage it yet.
Jeff Dudan (03:55.562)
Yeah, well, I mean, as you've as you've proven, businesses are a high class asset and not everybody can start, you know, building a national company. So for a lot of people, it's a great way to get involved in entrepreneurship. So we'll kick it off. And then usually. Well, you know, I'll kick it back to you all just, you know, say who is Michael Furtick? And I love you just kind of go back and some people go back and they have some great stories about.
Michael Fertik (04:11.041)
I'm proud of you. I'm proud of you.
Jeff Dudan (04:23.298)
how they grew up and how they got through college and how they got into their early career, which I think is particularly interesting to people who are looking at being entrepreneurs. We don't really talk that much about franchising. It's just more, it's more of a broad, we're building a broad audience. I mean, we have celebrity chefs, we got Chris Voss, we got Fern Harnesh. I mean, so it's not a franchise show. It's just, you know, it's just really, you know, people with cool stories that can kind of speak into other people's lives and share something that inspires them. So.
Michael Fertik (04:35.955)
I get it.
Jeff Dudan (04:53.686)
All right, well, we'll kick it off. Three, two, one. Hey everybody. This is Jeff Dutton and we are on the home front with Michael Furtick. Welcome Michael. Yeah. Coming to us live from Paris. So excited to spend this time with you today. For people that don't know who you are, reputation.com was a big part of, of what you've done and what you've built.
Michael Fertik (04:54.531)
I'm ready.
Michael Fertik (05:03.949)
Thank you, Jeff.
Jeff Dudan (05:19.106)
And now heroic ventures, which is investing in AI robotic machine learning, which I'm interested to know the difference between AI and machine learning. We use them both, but you know, that's a, that's a, that's as much as I know about them. Um, but anyway, Michael would love to learn a little bit about you and how you grew up. So who is Michael Fertek?
Michael Fertik (05:32.332)
Uh huh.
Blueberries, Chickens, and Lessons from Failed Family Businesses
Michael Fertik (05:39.897)
Thank you, Jeff. I often say that I started my first company when I was 19. I'm now 45. But that's not the entire story. I grew up on the Upper West Side of Manhattan. I was from a very middle-class family, and I went to a very fancy high school on the Upper East Side. Now, if you're listeners or you go to the Upper East Side, Upper West Side nowadays, you probably might not see a difference. But when I was a kid, those were two very different.
parts of New York, the Upper East Side was known as silk stocking. Because it was very fancy, the Upper West Side, there were hookers on my corner. I was growing up in crack vials out there on the street and
Jeff Dudan (06:18.87)
Well, they're on the Upper East Side too, but it's just a different price point.
Michael Fertik (06:22.985)
Well, a very different price point and they don't stand on the corner waiting for customers. So now that now they're both very nice neighborhoods and so forth and so on, although New York is facing some recent challenges, as you maybe you know. But there was a filmmaker in the New York 1980s who made some very famous films and won his first famous film, the name of which I'm forgetting.
Jeff Dudan (06:27.607)
Now you gotta call him.
Michael Fertik (06:45.729)
The entire premise was there was a kid from basically my street who went to this very famous high school, which was basically the high school I went to, his model of the high school I went to. And like the world got rocked because this guy from the other end of the side of the tracks went there. So anyway, long story short, that was the context in which I grew up. And I grew up a Jewish kid, very liberal household, artists, all the men in my family, even artists for
three, four generations, my mom was a shrink. And I grew up in this not great neighborhood and I went to school in this very fancy place and I'd go across the town by bus. And this is where the first business came from. So when I was in fourth grade, when I was in fourth grade, I was, because I grew up in the neighborhood I grew up in, I was comfortable walking down to the avenue.
on the kind of the wrong direction, so to speak. This is New York in the early 1980s, okay? So they have a new, the wrong direction and I would go to the bodega and I'd buy some Snickers bars and you know, Tic Tacs or whatever, Starburst, I don't know what have you kind of candy. And I'd pay whatever 10 cents, 50 cents, whatever the price point was, I don't remember. And then I'd come back to the bus stop and I'd sell it to all the rich kids. At a big markup, because they were
too nervous to walk down that block and a half to that, it was perfectly safe, it just didn't feel good. They're little kids in New York, and so that was my business. And if I had customers, I made a bunch of loot, you know, like two bucks, three bucks of profit. And if I didn't have customers, I would eat the candy. So I had my own loot of a different kind. That was my first enterprise. And I bet you a lot of people who are listening or who aspire to be full-time entrepreneurs have...
that kind of recall today on Instagram or TikTok, you call it a side hustle. That was my only hustle. But they have some kind of trading hustle, right? Where you buy low and sell high. I hope it's not just meme stocks and crypto and so forth. I hope there's actually something that people really want to use in different ways. But that's how a lot of people got started. That's how I got started. And I got started understanding the power of demand, the power of arbitrage, the power of giving people what they want, and how just a little bit of friction.
Michael Fertik (09:09.973)
walking around the block and being prepared with a dollar in your pocket and overcoming that little bit of friction could provide just enough value. I didn't say it to myself in those terms, of course, I was in fourth grade. But I understood viscerally that providing a little bit of value overcoming a little bit of friction was enough to create a business doesn't mean it's the world's most scalable business, but certainly was enough to create a business. That was when I got the bug. I got the bug to be in business. And if you
asked me in junior high school or high school what I wanted to be, I would have said, well, I want to be an ambassador or something like that because I had notions of that and it was still a very wonderful career for people who want to do that. But it turned out that I went to law school, I went to college and all that, but I ended up back in business where I started in fourth grade.
Jeff Dudan (09:59.702)
Yeah, convenience. People are willing to pay for convenience, even fourth grade rich kids, apparently.
Michael Fertik (10:06.125)
convenience, safety and pleasure, you know, all those things, right? It's like, hmm, you know, can you get, can you make your own cheeseburger or burger or hot dog, what have you? Yeah, by the way, if you've ever tried to make your own pizza, I mean, it's just like a bad decision. I mean, I don't care what people say.
Jeff Dudan (10:10.099)
Yeah.
Michael Fertik (10:29.513)
right? These homemade pizza ovens and these things, they look great and you buy them and try them and whatever else. I'm sure some people had a whole hell of a time with him and one of my best friends built a whole Italian style pizza oven, he made a bunch of money and, and I gotta tell you something, you know, for like 15 bucks, or depending on where you are, eight bucks or 20 bucks, depending where you can get a world class pizza, and they deliver to your house and it's perfect, or you could spend six hours making it and like, what are you thinking? Like this is not a cup or donuts. You ever try to make a donut? Just go to Krispy Kreme.
Division of Labor vs. Absolute Dollars: Why Time is the Real Asset
Jeff Dudan (10:58.401)
Yeah.
Michael Fertik (10:58.965)
It's great. You know, go to whatever, you know, Dunkin Donuts. It's better. So it's flavor convenience and, and safety.
Jeff Dudan (11:05.642)
Yeah, so that's, I mean, that's my argument against gardening. I mean, I read, you know, every, so every mother's day, my, my wife wanted a garden because her family grew up on the West side of Charlotte and they were farmers and they had all this stuff and, uh, two experiences. Cause I can say this cause my in-laws don't listen. Um, so I, I was staying with them before we got married and I had my contracting business and I had a seamless gutter.
Michael Fertik (11:12.654)
Okay.
Jeff Dudan (11:34.518)
guy who did gutters for $2 a foot and he could run a whole house in three hours or whatever. So we wake up on a Saturday and my father-in-law is like, hey, I've got a section of gutter that we're going to replace. It's on the front of the house. We're going to go to Home Depot. We're going to buy the gutter and then we're going to take it down and we're going to put it back. And I'm looking at this, I'm like, this is going to be a six to eight hour deal. And by the way, to buy the guttering at Home Depot costs the same to have my contractor come out.
and furnish it and install it. And I had to do nothing. So basically I said, you know, I'm not paying any rent, but what I'd like to do is I'd like to take care of this. I bought my Saturday back for like $300. And it was, yeah.
Michael Fertik (12:14.869)
Yep, there you go. It's called it's called the division of labor, which is another word for civilization. Yep.
Jeff Dudan (12:20.306)
Well, but that's subtle, but significance. See, I mean, like they were not entrepreneurial. So they didn't really put a value. They put absolute, it was absolute dollars where I put the value on my time as to what else I was gonna get done that way, which at that point I was working seven days a week trying to get things moving, but, and then, you know, same thing with gardening. I mean, we're out there, deer's, you know, you let your guard down, the deer come, they eat, you know, you've got 42 hours in this garden and you end up with some wormy zucchini.
You know, that looks, I mean, so.
Michael Fertik (12:50.785)
funny, when my father finally made a little script, he bought a house in Connecticut and he had a green thumb, my dad. And so he made us do a lot of gardening. And so I raised chickens and I sold the eggs to my teachers. And I don't know how we made any money doing that, but we did that. And then I was responsible for the chickens and we had a chicken coop.
Jeff Dudan (12:55.788)
Yeah.
Michael Fertik (13:18.525)
And we run rooster and a whole bunch of hens and, you know, proverbial, like cock-of-the-walk kind of story. I'd walk in there to feed the chickens and I had a pail, you know, those old aluminum garbage cans with like the pail cover, like that aluminum cover, like in the cartoons. And this stinking chicken, this rooster, was threatened by my presence and he would attack me every time with his talons. And...
This is not a, this is like a, like if you ever actually dealt with a real rooster, these things are violent and dangerous. And I was like, what part, they're nasty and they're really stupid. Okay. And so they don't stop. So I, I started figuring out, I take the pail, I fill my pit, my little bucket of, with the feed. I had to bring it to the chicken coop and I take the cover of this aluminum garbage can and I would bonk him. I'd use it as a shield and he attacked me. I bonk him and this guy would keep attacking me. I keep bonking him, keep, right. And so this was like,
Jeff Dudan (13:48.895)
Oh, they're nasty.
Michael Fertik (14:12.637)
inspector Clujo, you know, where Kato comes like a taxi like every time like I walk through there the chicken coop and I fucking bought this guy. And this was the anyway, this was the nature of my upbringing. And I don't know, we didn't make any money. But that was sort of the deal. We had to do chores. And then my dad had a green thumb. So we had blueberries, which are unless you're a professional blueberry grower, blueberry bushes are just a mistake. Okay, just to just to pay you back. I mean, we had crows, we had I don't know all kinds of birds.
Jeff Dudan (14:17.597)
Yeah.
Michael Fertik (14:42.357)
We probably got one pound of blueberries every year from like 30 bushes. And then we had apple trees and pear trees. And what you figure out is that without pesticide, you get these like gnarly prehistoric peaches and pears. And so anyway, it was fun, I guess. But, um, you learned a lot. And then my father decided that he was going to be a rose farmer, not just a rose farmer, but a cold weather rose farmer. So he set up in the state of Connecticut, my old dad, film director.
Jeff Dudan (14:42.606)
You gotta keep the nets on them.
Michael Fertik (15:11.617)
passionate, romantic soul, artistic sensibility, not a businessman, he imported roses, cold weather roses, meaning hardy roses that sustain the cold weather from Germany, I remember we went to Germany, we went to a bunch of roses, we went to the rose places, we went to buy some roses, you have all of them, we're gonna sell you some roses, we said buy the roses, bring them over the roses, and then turns out in order to import roses, you need a quarantine station, and there were no quarantine stations in the...
New England at the time or whatever, because no one wanted to do it because no one was foolish enough. So he opened his own quarantine station. So we had the quarantine station on this, right? So I'm here, like, you know, whatever, 11 years old, 12 years old, helping my father manage the quarantine station, which is nuts. And then he terraced this hill, like, clear-cut it, terraced the hill, installed all the roses, and like, a thousand roses, whatever it was. And then within like two, three years, because he had run out of attention and time.
And my older brother who he was hoping would take care of it, take an interest in the roses, didn't. These roses basically died. So I watched my father try this agriculture, this gardening business to make roses, and I watched it just not work. And I was like, okay, guess which business I'm not gonna be in? Roses and chickens and blueberries. That's the answer to that question.
Jeff Dudan (16:22.69)
Yeah.
Jeff Dudan (16:26.366)
So would you consider your family or your parents to be entrepreneurial before this? So he was in the film industry.
Autodidacts, Oscar Winners, and the Gift of Blurred Work-Life Lines
Michael Fertik (16:30.505)
extremely entrepreneurial. Yeah, extremely entrepreneurial. My father, I'm going to use a big word, it's a $5 word. So get ready for it. It's auto didact. He was an auto didactic person. And that means that someone who teaches himself things, right? So my father went to college, he went to graduate school, he was not what you call like a stellar student. And I was which is which is the reason I'm making that distinction. But he was definitely an auto didact. And one thing that I learned from my father, which I retain from him
And not for my mom, my mom was I think sort of even more talented than my father in certain ways and an exceptional mind, but not an autodidactic personality, not someone who taught herself things. She was someone who learned through programs and through courses and through lessons, which is how a lot of people learn to. But my father was someone who liked to teach himself things and learn through experience and learn through doing and so my father, you know, by hook and by crook, he started in the radio business and then he got invited to do something in commercial advertising and then he films and he wanted to
Oscar when he was 35 years old or whatnot. And he was a guy who was extremely entrepreneurial in running his own business, which had four or five employees. The way the film business works is if you're in production, you might have 20, 30, 40, 50 employees. If you're not in production with a certain shoot, you might have one, two, or three core staff, skeleton staff. So, and by the way, he had that office in our house. And so I grew up...
just thinking that you don't have like this, you have this sort of porous barrier between work and life. Like his office was right there. I walked through it and go to the kitchen and like someone I'd have lunch with, someone who works on the team. And I just didn't see any particular difference, which is at some advantage and some different disadvantages, but his office was our house. And then he'd go to the studio to shoot the show. And very entrepreneurial guy. I can't say he was, you know, someone, let's say like you probably, like a very good.
Jeff Dudan (18:01.131)
Right.
Michael Fertik (18:24.385)
businessman, I can't say that he had a business mind, I can say that he was very entrepreneurial in making things happen for himself. He was an excellent provider for us and our family, but neither my mom nor my father had a business head, let's say. And so that had some long-term consequences for the family and so forth, which is fine, no one should feel sorry for us at all. But I did not grow up in a household where someone was like, yeah, also there's something called a spreadsheet.
And also, at the end of the month, it has to add up. I grew up in a house where I was like, well, let's hope it works, or it's gonna work out, or it's all gonna be fine, or let's worry about it later. Which, by the way, is a good strategy for about 10 minutes, but not much longer than that. Right? It's not a plan, right? If you have a financial interest and a financial outcome, you have to have a better plan than that. You can't just wing it. Now, so extraordinarily entrepreneurial person.
Jeff Dudan (18:52.768)
Right.
Jeff Dudan (19:09.899)
Right.
Michael Fertik (19:21.025)
extraordinarily inventive person, extraordinarily creative person. And my mother was very inventive. She's died, my father's still alive. My mother was very inventive, very creative, but also very shy person. She had a lot of inventions she made. She made, I'm gonna give an example, and I don't know if it's gonna be a great example, but it seemed very sensible at the time. My mother got ill towards the end of her life and she was in the hospital and she had, she could sew well.
And she had, as one of her many inventions in her life that she devised, she had, she sewed a pair of underwear effectively that you could velcro from the side and attach from the side. And when someone's bedridden, it was easier to kind of attach and detach it from the side. I'm sure in your life, Jeff, through some moment of status, you or someone you know, or someone you know who knows someone, has been bedridden for a time. And you know that it's difficult to
take off the underwear, the underclothes, sort of down past the legs and so forth. And so maybe a Velcro mechanism could very much work. By the way, babies do it. Kids, little kids use it, right? That kind of thing.
Jeff Dudan (20:27.498)
Yeah, it's brilliant actually for those situations.
Michael Fertik (20:30.325)
So that was my reaction too. I didn't know, I didn't think about it very deeply, but she was so shy and nervous that when I tried to make some polite suggestions about how she might go talk to people in the garment district in New York about how to manufacture it and market it and so forth, she just, I remember she was in our, I don't think I'm saying anything too personal. She's now dead, but she would be very proud of me for telling the story, for being so open. She started to cry.
she started to cry standing at the kitchen sink because she was so nervous about the prospect of even talking to one person about this. So that was a limitation that she had. We all have our own limitations. That was hers, one of them. And what I can say is that she was very inventive and my father's very entrepreneurial, but neither of them was, let's say, a business mind. And that's okay, not everyone has to be. But I do think that if you go into business, at some point along the way, you gotta develop that vocabulary somehow.
At least some rudimentary understanding. No one's going to ask you to be the best in the world, but you got to do something because at the end of the day, the end of the month, the end of the year, the books have to balance and there's got to be a plan and it's got to make some amount of sense and you can always mess it up, but you want to have a plan.
Jeff Dudan (21:42.798)
I was having an interesting conversation with my oldest son over the weekend. And we were talking. He said, you know, I've been thinking a lot about my career and where I want to go. And I've really been thinking. He's 26. And we work together. He's a finance and econ guy. So he does our mergers and acquisitions. And he also leads our growth in the franchise development area. So he's really.
Michael Fertik (21:56.974)
How old is he?
Okay, good. Sounds like a responsible guy.
Okay.
Michael Fertik (22:10.851)
Oh wow.
Jeff Dudan (22:11.666)
He's doing a great job. We work together well. I coached him in tons of sports. So we developed this kind of working relationship where we could, you know, in stressful situations. So those situations had been more.
Michael Fertik (22:24.083)
Kudos to you both, right? To both of you, right? To both of you, right? Don't you think?
Jeff Dudan (22:28.17)
Well, him, he's a lot more mature than me. He's had a lot to put up with. He's, I'm an acquired taste, Michael. But he said, he goes, you know, I've been thinking, you know, I could see that. And he played it out almost to 25 years. And I said, you know, it's really interesting, Zach. I said, the things we're doing right now, exactly where we are, what we're doing, the different buckets of assets and attention that we give things. I said,
Michael Fertik (22:31.401)
Ha!
Michael Fertik (22:36.823)
Okay.
Jeff Dudan (22:58.554)
I have a, I can show you that from 20 years ago on a, the, the Steve jobs, you know, for a quadrant thing where I'm going to focus on IP franchising, real estate, uh, you know, and one other thing, uh, you know, some technology or whatever. But I said that if you, uh, you know, and now somehow based on that, we, I've ended up exactly where I wanted to be. Maybe I didn't think I'd get this far. Maybe I thought I'd get farther. But.
You know, having the entrepreneurial experience at home where you're walking through the kitchen and you're, you see in this blurry line between it never turns off, they're always thinking about the business or taking a call on a Friday night or doing whatever, that's such a blessing to give your kids, to give them that exposure to thinking that way. Because, you know, maybe, you know, in your dad, he got exactly the life that he dreamed of.
in producing this film and he never really developed the let me let me figure out how to make this wildly financially successful let me see I can leverage this let me see I can syndicate whatever it is I mean he was an artist he was a creator he wanted to make great stuff and you know what kudos to him for fulfilling that and ending up but yeah
Michael Fertik (24:15.565)
Oh, I 100% agree with you. I 100% agree with you. I mean, very few people can make their living as artists and he did. He paid for university college for his kid, like he just did so many things for his kids, you know, private school, just a lot and you know, provided for his family as an artist. And by the way, as an artist who did not make a lot of compromises, so he had opportunities to make a lot more money as a director. And I think as a producer, if he had just decided that he was going to do stuff he didn't.
Jeff Dudan (24:20.973)
Yeah.
Jeff Dudan (24:36.821)
Mmm.
From Law School to Launch: The Birth of Reputation.com
Michael Fertik (24:42.217)
not he was opposed to, but just didn't really want to do like, you know, his great passion was classical music. And he made films about classical music with his spare time instead of making, you know, big action packed movies where the big dollars come or music videos where some dollars go right. So he could have he could have, you know, done it, but he always maintained a balance between his, his obligations to family and his own artistic integrity. And by the way, by the way, I think I think you're exactly right. You know, he was one of these rare people like you, it sounds like
Jeff Dudan (24:44.674)
Yeah.
Michael Fertik (25:11.705)
who's able to fulfill his life goals. We're almost all of his life goals, let's say. So huge kudos to him. There are a lot of ways to live one's life. And so long as you're doing it according to your vision and plan, it's marvelous. And one more thing I wanna agree with you on. Which is where? Well, no one's perfect. So all I can say is that.
Jeff Dudan (25:31.19)
This is rare, by the way, but go ahead. Do people agree with me?
Michael Fertik (25:40.197)
He did you alluded to it, but in case it wasn't in case it wasn't clear, I want to pick up on it. He gave us the gift of work. And he gave us the gift of not drawing a very hard line between something called work and something called life. I think it's fashionable today. I think it's, you know, I get under the Millennials or the Gen Z or whatever.
There's a group of people who want to say, look, I want to live to live and I don't want to live to work, which is fine, which is fine. But there's a, it's perfectly fine. But there's a difference in how value systems are articulated. In other words, if you are, there's a line from a country song I like called Buy Dirt and the guy says, do what you love and call it work, you know, which isn't going to be true for everybody. Sometimes they call it work because that's how you get paid. Okay, so wake up, grow up, you're getting paid. That's why I call it work. But
But if you're lucky enough to grow up in a household or environment where work is life and life is work, then your need for a break, which is still there, we're all humans, we all need to have time off, we all need to, you know, recharge, decompress and blow steam off, however you do it. We all do it in different ways. But if you're lucky enough to have that combination to find something that you really want to do, it does make it a lot more natural to do it tomorrow morning.
to do it tomorrow morning at five in the morning when the rest of family might still be in bed. And my father gave me that gift. He taught me without teaching me. He taught me by showing me that this is how you do it, Michael. And, you know, I don't know how traditional you are or whatever else. I'm a little bit traditional, so I'll say it this way. No, he also taught me that's how a man is supposed to live. Okay, that's how a man is supposed to be responsible towards his family. And there are a lot of people who feel that way about how a woman is supposed to be towards her family. And that's also
Jeff Dudan (27:29.026)
That's right.
Michael Fertik (27:33.657)
quite wonderful, but he taught me both things and I am forever grateful for it. And even though he couldn't really run a spreadsheet, okay. So to speak. So what in the scheme of things? So what he was a marvelous dad and a marvelous provider, and he took a lot of responsibility and took responsibility for his entire family very, very well. And, um, one more data point.
I was the third child, but I was the first child between my father and my mother. And my father in the 1970s, in a very early precedent in New York state law, got effectively full custody of his two kids, who are my older brother and sister, when that was extremely rare in the law, right? The custodial law and divorce law is still very much sort of in the mom's corner by default as a presumption. And there might be good reasons for that, but there might not be.
Jeff Dudan (28:14.446)
That's right.
Michael Fertik (28:25.173)
And certainly back then it was true 50 years ago, let's say 40 years ago. And so here's a guy who took way more responsibility raising two little kids basically by himself than my mother came into his life. And then they had me and taking responsibility for everybody all as an artist, doing it as a working artist. So I have enormous respect for that. And so I'm forever grateful that I had that model that I had to follow.
Jeff Dudan (28:50.846)
What a great testimony and what great experience that you were provided. People, you go get your haircut and they'll be like, are you going back to work? And I always don't know how to answer that question. It's like, I don't consider, I don't know. I don't consider it work. I have things to do, but it's just a continuation of my life. So I just say yes. That's what I said. Yeah, I'm going back to work.
Michael Fertik (29:18.337)
Well, you know, but Jeff, you know, Jeff, people, people listening to this podcast or watching it, you know, as visually as it may be broadcast to or who gets to know you, you know, this is the first time you and I have met, but look, you're healthy looking, you got this cool looking studio. I hope people can see it. Visually it's like, looks purple, like it's a, I don't know, like a psychedelic kind of like cool place, like a man cave. You look fit and you look like you're eating well and you look like you're exercising, you look well groomed. Okay, so I'm saying all this because
people may not be able to see you. But you might appear to the people who listen to you or just coming into your life as I am the first time after 20 years of getting here, you might appear like you're living on top of a hill, but it's so important to realize that 20 years ago, you're probably doing this, whatever this was, in your bathroom, right? You were doing this on the floor, you were taking phone calls on the floor of your bathroom because your kids were little. By the way, I did it too, right? I took interviews and phone calls at three in the morning.
Jeff Dudan (30:09.023)
Yeah.
Michael Fertik (30:15.453)
or out on the street with a baby in my carrier, right? Because I had no office and because there was nowhere to go at three in the morning, that's what you had to do, you had to do it. And so you got yourself here and now you might make it look easy, but the same feeling you had then, which was, well, I'm going to work, sure, I'm going back to do my thing, just happens to be in the bathtub with no water in it while I'm making a phone call at three in the morning to some guy who's a provider, right, a vendor, right? And so...
Jeff Dudan (30:40.811)
Yes.
Michael Fertik (30:43.137)
That feeling that you had is now with you still, but that thankless work over decades, I heard you say 20 years, so that's decades, that's two decades, definitionally, that is what got you to this place where you make it look easy and you can wear, like you can kind of feel a little bit, we probably got a makeup guy now, you know? So the point is that, right?
Jeff Dudan (31:01.288)
No, dude, this isn't my natural complexion actually. I think it's liver function, but you know, a little jaundice, but it's okay. I look at it's color is color.
Michael Fertik (31:04.58)
Okay, well, God bless.
Okay. God bless. Well, whether it's jaundice or whatever it is, you know, you look sharp. And the point is that you're still doing it. And even though you're still doing it and you look like you make it easy, make it look easy now, it's not like you won the lottery. Nobody gets to where you were. Chris Rock, I saw Chris Rock, the comedian, in a documentary. I'm not a big stand-up comic guy, but he's a guy who worked very hard. And about 15 years ago, I remember seeing this, I was flipping through the channels.
I saw Chris Rock in a car doing an interview and he said, you know, he says, you know, whoever he's talking to, he says, you know, people think I won the lottery. Do you know how hard I worked to get here? I didn't win the lottery, you know? So you didn't win the lottery, Jeff. You worked your tushy off and your son's working his tushy off and maybe your other family members are too, in order to keep this empire going that you're building.
Jeff Dudan (31:48.459)
Yeah.
Jeff Dudan (31:59.01)
Well, I appreciate those comments very much. Uh, my time to your point, I mean, we, I built our first house. It was a small house. We had three small kids. So at four or four 30 in the morning, I would re I would sit on my bathroom floor with my back against the tub. And I would read because that if I went out and turned the lights on and the dog barks, then people are getting up and then I'm in trouble. So I would just, I knew that that's where I went and I would just read, um,
good, great and all the things that I needed to you know, like how can I how do I think about building a business and people don't see that. And then Yes, sir.
Michael Fertik (32:35.757)
So can we just point, can I point something out here? Can I point something out here? So you and I just met about 40 minutes ago, is that correct? We've never talked before in our lives, is that correct? And here I am, I said, I pulled it out of my drawer here, the concept that early in your business building career, you were sitting on the floor of your bathroom. I just said it, and by the way, you just said, yeah, I did that. And I would love your listeners to know how often this exact fact pattern comes up. And maybe your kids were little at the time, is that correct? Right, you had nowhere else to go.
Jeff Dudan (32:41.698)
That's right. That's correct.
Jeff Dudan (32:52.238)
100%.
Jeff Dudan (33:03.032)
Yes.
Michael Fertik (33:05.249)
Because you go to the living room, someone's gonna wake up. You go, if you've got a living room, you go to, there's no extra bedroom. Or you go to the, maybe the garage is too cold, okay? Or it's got bugs in it, or whatever it is. So you go to the bathroom. And so, the number of people I know who are very successful today, who took hours and hours and hours and hours and hours and hours of work in their bathroom, sitting next to that tub that you just mentioned, is Legion. And I'm so glad that you just told me that story, because I want you to listen to this and know, some people I know sat in their closets.
They sat in their bathrooms. They sat in their garages. They didn't need to make some magical studio in their garage. They just sat wherever they could on the stoop and they got it done. And that's why they're, that's why they are where they are today.
Jeff Dudan (33:47.306)
Yeah, Stephen King, I think he had a stacked washer and dryer. And I think he pulled it out of there and he put it like a child's desk and a chair in there. And I think that's where he wrote like, Carrie. I mean, he was, they were broke. Like they were, I mean, they, I read all of his, like how Stephen on writing and you know, how, what his process was and, and all of that. I used to read a lot before I had kids. I read a lot of Stephen King, but then after I had kids, I'm like, I don't know. This is a little dark for me with.
But yeah, I mean, he literally wrote the stuff in, you know, a four by six closet or whatever it was. And he just sat there, clipping away at it.
Michael Fertik (34:26.637)
Another writer who comes to mind is a guy named Thomas Wolf, not Tom Wolf, who wrote the right stuff, but Thomas Wolf, who wrote Look Homeward Angel. He was six foot six, and the story goes that he would stand on top of his refrigerator. At the time, they called it, what did they call fridges at the time? They called them whatever, ice boxes, yeah, ice box, thank you, and he would stand next to the ice box and he'd put his paper on top of the ice box and he'd write.
Jeff Dudan (34:47.02)
Icebox.
Michael Fertik (34:54.349)
because he was tall enough, like he'd lean over the icebox. Now it's his desk, you know? So, yeah, look, you do what you got. Like the people who tell you they gotta have an office, they can't be productive, you know, people like you find a way. They really do. People like Jeff find a way.
Jeff Dudan (35:12.518)
Awesome. Well, and last, before we leave this awesome, I guess I forgot we're recording. I'm just really enjoying this conversation with you, Michael. But call me traditional if you want to. But I think a big difference is I do take a huge responsibility in providing, even to the extent that it's not to my, I mean, I'll sacrifice whatever it is for me.
to give my wife and kids what they need and also the people closest to you. You know, it's just, I come from a generation where everything we were taught was service. It was just, you need to serve, you need to work hard, you need to, you know, pay attention to what other people need. And I think that served me well. In some ways, I could have definitely been a little sharper early on, maybe a little bit greedier, probably a little bit more thoughtful about, you know,
not wanting everyone to be happy or comfortable. I think you can get better outcomes when there's good conflict and healthy conflict. And to your point, you're managing to a specific set of financial or deliverable type outcomes and stuff like that. But the underlying, big part of who I am is just being able to finish impeccably and to make sure that I finish what I started.
and take care of people and that kind of thing. And it's certain people will give you $10 for every dollar that you can take from them. And it's worked for me so far. I might not end up as far as I would have, but I think I'm gonna be happy with it.
Michael Fertik (36:54.465)
Well, it sounds like you are and it sounds like your vocation is your vocation. There's no luckier thing in the world. You know, I know a lot of guys who are really rich are always pissed off and that's not a nice way to be. Yeah. They're just not as rich as the other guy they know. You know what? That's never possible. There's always another guy.
Jeff Dudan (37:03.682)
Oh, yeah.
Jeff Dudan (37:08.086)
That's right. Well, invest in Nvidia, that's all I gotta tell ya. Just put some money.
Michael Fertik (37:15.357)
Oh, no, I can't I get asked about it in video all the time because I, I do a lot in AI. And I don't comment on public stocks, but I do own some Nvidia and thank God so far it's worked for me, but I'm not a public stock investor. I'm not knowledgeable about those things. I can't recommend those things. But, but, but certainly Nvidia is one of the most remarkable companies period just in terms of what they're able to pull off and how they're catalyzing this AI revolution. Incredible.
Jeff Dudan (37:41.794)
Yeah, really, really well done. Well, Michael, I'd love to move on to your early career and understand how you got from Harvard and what happened between them and what your vision was for reputation.com and what you saw during that time. And then, you know, bring it forward to what's relevant for people today. I mean, you know, we're all competing for attention on the internet.
Uh, you walk into places and people, you know, with the big data, people already know who I am, they already know what to sell me, they already know what to charge me, which is more, uh, you know, and, uh, you can just tell by the advertisements that I get, you can tell by the direct mail that I get. So like, you know, how do you think about, um, uh, you know, how people can balance the, the.
Michael Fertik (38:20.566)
No
Michael Fertik (38:26.473)
Yeah.
Jeff Dudan (38:38.754)
Privacy versus free speech aspects of what's going on with big data today. And then reputation.com. What is, what is its role inside of that?
AI vs Machine Learning Explained (Finally)
Michael Fertik (38:50.165)
So we'll cover a lot of ground pretty fast. So I went to college at Harvard. I grew up in New York, I went to college at Harvard. And then I started a company in college that was my first software company. It turned out to be pretty good for some kids, but not an enormous outcome. And then I went to law school. And I went to law school, I went to law school because I grew up in the family I grew up in, which was.
a Jewish family with the kind of a sense that my grandfather, my mother's father had been a lawyer and he died when I was six weeks old. And it was like the concept that I had inherited his Neshama. Neshama is the Hebrew word for soul. So you can imagine like, you know, Michael, you have inherited his soul. So you hear that like 200000 times when you're growing up like, wow, I have inherited his soul. Then you're like, fuck, I got to go to law school. Right. So I went to law school. Well, no, it was like, yeah, it was like so.
Jeff Dudan (39:37.976)
No, no pressure.
Michael Fertik (39:42.261)
And my parents, you know, I didn't even diligence what law school was. I went to Harvard Law School, it was like a famous law school, and I thought law school was gonna be like, we're gonna talk about philosophy and the Constitution, and it's not, it's a professional school. You gotta learn evidence and corporations and commercial paper and all this stuff. And I was like, this just sucks. That was my feeling about it, not asking you to agree. And so it took me about a year to figure out where I belonged in law school, and I found some professors I loved, and I found a way to make law school something that I liked. And by the way, that is something that
I'm teaching my oldest child right now. It's very, very important to me right now is that trying to find the pony, my father called it, find the pony. Finding the thing that's fun and sustains you in the stuff that you've got to accomplish is a incredibly important skill. And in this period of coddling of children, where it's like, you don't feel amazing in the swimming pool? And you don't like doing laps? Just don't.
Let's do horseback ride. You don't like to feel amazing doing horseback. Like, okay, let's try it for a year. And then if you still don't like it, let's try something else. Well, let's just, right, find the pony. Learning how to find the pony. And there's always a pony, right? There's always a pony. There's always something you can find. It may not be a big enough pony for you, but find the pony. Find the fun, find the pleasure, find the thing you can get out of it. Because that is, right, so as a general rule,
If I am spending, I think this might be of interest to your show, and that's why I'm saying it now. If I'm spending, let's say, of the time in my day that I'm working, if I'm spending 25% of that time, that working time, doing something that I really like doing, that's pretty good. If I'm spending 25% of the time doing something I don't like doing, that's also pretty good. And the middle 50% is somewhere in the middle, right? But if I'm spending more than 25% of my time doing something I don't like
time, my work time, in an activity that I love, the actual activity like talking on Zoom or doing interviews or whatever, let's say making it up. Because we're on Zoom and on an interview right now, that's why I'm saying it. If I'm spending much more than 25% of my time for a long period of time on a sustained basis doing something I really like doing, I'm probably doing something wrong because I'm not doing the stuff that's hard for me. So then if I'm spending much more than 25% of my time on the other hand, doing something I don't like doing,
Michael Fertik (42:08.269)
in terms of the minutes, like emailing another customer, or emailing, recruiting a particular kind of person, or working on marketing collateral, or whatever it is. If I'm spending a lot more than 25% of my time on something like that, then I'm probably doing something that isn't quite right, because I'm probably not doing something that's the best use of me. But it should be about...
Jeff Dudan (42:28.118)
Yeah, and it wears your battery down. You'll wear your battery down doing things you don't. Your will is an exhaustible resource and when you're doing stuff you hate, you just burn it.
Michael Fertik (42:36.693)
Right, and then by the way, at some point, if you're doing it right, you might be able to hire or partner with someone who's better suited for that. So that's a good signal. Now 25% is pretty good. One out of every four hours is pretty good. It's not zero, but it's not six out of 12 hours. And by the way, this goes in waves, this goes in waves, but if over an extended period of time you find yourself doing something that's out of whack with that rough percentage, you might wanna reconsider it. That's my percentage. Okay, so.
Anyway, right now, very personal to me, right? Very important, where I say, look, you gotta find the pony because there's always something you can find. And right now, my oldest, who's extremely good at, thank God, just everything he's touching, he's hitting a patch where he's like, this is just not, everything is feeling oppressive to him. It's feeling like a burden. And I'm like, listen, he loves fencing. He's very good at fencing. Like, he's really good at fencing. And now...
he's being invited to perform at higher level and he's feeling pressure. I'm like, look, you know, this is still a game. This is still a game. It's fencing, right? This is not your life, this is fencing. And if you're not finding the pony in it, not every day, not every second, but if you're not finding the pleasure in it, not every second, but if you're not even finding the pleasure in losing some bouts, because you know what, your hero, the Olympian you think is so great, you watch him on YouTube.
he's lost thousands of matches. Michael Jordan lost thousands of games, right? Thousands, right? And he was the greatest ever in basketball. And in fencing, your hero's lost thousands of matches. If you can't find the pony in that loss some of the time, then you and I gotta sit down and rethink it. So anyway, yeah, so that lesson was very important. And...
we, I was able to apply that lesson to law school. I found a version of law school that I liked. And then I started a company right after I clerked, which was called Reputation Defender. Sorry, well, I was, right after I started law school, finished law school, called Reputation Defender. And at the time I was working for a federal judge in Kentucky, in Louisville, Kentucky, he's the chief of the judge of the Sixth Circuit Court of Appeals of the United States, Danny Boggs, Danny J. Boggs, I'm still in touch with him, amazing man, amazing.
Michael Fertik (44:58.133)
Reagan appointee, appointed at the age of 36 to be Deputy Secretary of Energy, which means he was like fourth in line to handle nukes at 36. And then at 38 he was appointed to be circuit judge at the Sixth Circuit Court of Appeals in the United States, amazing guy. Son of a postal worker, son of a Cuban mom, right? Danny Boggs, you wouldn't look at him and say, oh, that's a Cuban guy, but definitely a Cuban guy. And I grew up in Bowling Green, Kentucky, an amazing guy. Very literate, loved Rudyard Kipling, and he and I would talk all the time.
I was a liberal clerk and he made me his death clerk, his death penalty clerk, because he knew I was going to fight him on the death penalty. Even though I supported the death penalty, I told him about it. I was like, listen, this is just really bad. He made me his death penalty clerk, which was a big responsibility. In a long story short, it was during that clerkship that I started the company called Reputation Defender. I didn't launch it until after the clerkship was ended because it would not be appropriate. We started the company, didn't launch the website.
Then I launched the website and that company became very famous very quickly through some luck. We were hitting a nerve at the time, right? Like, you know, your privacy, your reputation is all being, is all up for grabs here by the internet and we're here to help you. So it was like this antidote to the risks of the internet. Boom, so, you know, the wired guys covered us and the big iron, the big press covered us and so we got well known and we got built a big business. And then
Eventually I realized that we had a chance to buy the URL reputation.com, which was better than Reputation Defender, so we bought that, reputation.com. And then we had an opportunity to realize that the big companies in the world, like the big car dealerships and big hospital systems, they needed this too. They needed to understand their reviews, they needed to understand their surveys and how people are talking about them on social media. And so that became our biggest business and we sold that consumer business to now part of a company called Gen Digital.
which owns Norton, LifeLock, and all those things, big companies, so that's good. But reputation.com continues, now called Reputation, officially, continues as a company that faces the enterprise and sells the biggest companies in the world to manage their surveys, reviews, and touch points, and customer experience, and manage their reputation online. And that became a really, really big business. And all these concepts of privacy and reputation, which are part of a continuum,
Jeff Dudan (46:58.51)
That's right.
Michael Fertik (47:23.649)
What do you do with your data? Right, that's what the question is, fundamentally it's answered a couple different ways. Well, it's your private information or your reputational information. For some people it's the same, for some it's not. That became the big thing that we started and I started the first effectively big privacy company online. And then I had an opportunity to step back and to become executive chairman of that company and to start some other companies, which turned out to be.
pretty good, pretty lucrative and the AI space and the eyeglasses space and so forth, sold some of those companies. And then I had an opportunity to become an investor. I call myself Heroic Ventures. And that means we fund heroes. And in the last four years or so, five years, I've started to invest in something that people talk about all the time called AI, which even the most casual observer can spell. It's spelled AI. And it's...
Jeff Dudan (48:14.925)
Yeah.
Jeff Dudan (48:18.926)
Thank you.
Michael Fertik (48:20.425)
It stands for artificial intelligence. And there are lots of different kinds of AI. It's not gonna solve all problems. Some people think of it like something that's gonna cure cancer, it's not. But it's gonna solve a lot of problems, gonna make a lot of things more efficient. It's gonna change people's jobs and take away a lot of bunch of jobs as well. That's part of the deal. But that's one of the things I specialize in. AI and yes, ML, if you want the difference between AI and ML, I can give you a blurb on that if you really want.
Jeff Dudan (48:49.83)
So we've one of the things we've done well is we have a good technology structure where With all of our different brands we've been able to get Nearly all but aspirationally we will have all of our data flowing into a data lake Which in franchising is difficult because you've got these different brands Typically, they're acquired into a platform the switching cost is too high for them to change the technology stack. So even though they're
owned by the same company, they operate as independent businesses within a platform. And it's very difficult to get real insights across all the customer sets. So our thesis was that we would start with companies that were relatively small and we'd have to be more patient and have a competency in growing those quickly. But then because of that, we could force them all onto the same technology platform and be able to...
you know, have a shot at getting all the data. So we've done that and we have machine learning running across it and we're starting to really understand how to help our business processes with AI, but I don't understand the difference between machine learning and AI. So I'd love to hear your explanation of that.
Michael Fertik (50:07.065)
There's probably no circumstance in the world where you'll ever actually have to know the difference between ML and AI. Let's let me say it that way. Right. It's, it's no, no. No, I will tell you so that, and I'll say it in a way I think that everyone can understand, but it's not, it's not really important, um, uh, for most use cases. Machine learning, you almost answered it accidentally by yourself without knowing it, maybe. Machine learning is a set of technologies that
Jeff Dudan (50:12.922)
Okay. Well, we can skip it.
Michael Fertik (50:36.481)
you apply to a large data set or data lake to discover patterns. That's what ML is for. That's what machine learning is for. It effectively identifies patterns and you can teach it through a set of instructions to look for certain kinds of patterns. And once in a while, you can teach it to look for any kind of pattern. And as it enters that second part,
looking for not one set of patterns like who are the best customers? That's classic ML or who spends the most money? That's classic ML. Or what do you observe about spend per customer? Or what do you observe about seasonality in my business? Those are machine learning pattern, pattern recognition questions. But as it's, as you start to ask it a question, that's more open ended, like tell me something interesting about my data.
That's when it starts to emerge into a field that we would call artificial intelligence. And artificial intelligence is the set of technologies that we use to achieve a complicated human task.
And you would ask your son or someone on your son's team, hey, you know, come back in a month or a week with interesting observations about our best customers. And that could lead to any number of answers. It could be, well, they turn out they live in Texas. It turns out that they use us twice a month, whereas the average customer uses us once a quarter. They turn out that they use us for things that we didn't really expect to be used for.
meaning, you know, I'm picking up on your gutter example, even though it was just from a long time ago, it wasn't necessarily your business, but you know, they use this for the gutters for their homes, but also for their offices. So, okay, so, and guess what? They spend approximately nine times what the average customer spends. So that's an amount of analysis that is a concatenation, it's a combination of a whole bunch of
Michael Fertik (52:52.461)
patterns and there's an insight that comes from that, which might be the following, and this is where AI becomes generative AI, or really could a cool frontier tech AI. I am oversimplifying for reasons of sanity, everybody. So when it becomes really cool AI, it's where like, okay, now I'm gonna offer you an insight. Hey, Jeff, says the AI. Now that...
Jeff Dudan (53:10.141)
Thank you.
Michael Fertik (53:19.825)
I have figured out all of these things about your best customers and your enterprise and your empire. Let me propose to you a few action items. One is let's invest more in, let's say in this example, Texas. Number two, and stop investing in, let's say, I'm making it up, Oklahoma or North Carolina. I'm making it up for the sake of this example. Number two, let's identify really early customers who are probably candidates to be big customers. How do we identify them? Well,
they look like this in the first 30 days of our meeting them. Now, number four, after we identify them, how do we husband them? How do we go find them and make them love us? How do we give them enticement to use us more? And so it's almost like finding your business class customers or your corporate travel customers if you're an airline or your regular customers if you're a restaurant owner or if you're a hotel person, right?
How do you identify that loyalty and how do you reward it? Probably the best people in the world, this or Las Vegas casinos, right? Right, so they just know like, oh my God, Jeff's back, give him my tight now and make it a double, right? So like, and you know what, your hotel suite's waiting for you, but don't go in yet. Stop by this table, right? And your old, you know, your old dealer, John or Sarah, she's waiting for you, she's waiting for you, right? So.
Jeff Dudan (54:25.046)
100%. Right. Yeah.
The Coming AI Misinformation Crisis: What You Need to Know
Michael Fertik (54:45.697)
That kind of, that kind of sense, they're very good at it. And so the AI part is what turns the pattern recognition of ML into a kind of human like task completer or open, open ended question answerer.
Jeff Dudan (55:03.835)
Yeah, analogy that comes to mind, I was in a meeting, it was with one of the national security advisors, and it was prior to the Cold War, and they had said, is the Soviet Union going to fall? And they said, well, if the Soviet Union was going to fall,
you would see evidence by these 15 or 20 different things. So let's send word out to our spy network and see if these 15 to 20 things are happening. And then immediately it started coming back. Yes, this is happening on the trains and this is happening with food and this is happening here. And then the question was, why didn't you report this? It's because we didn't understand the relevance of it. It's just data along with all of our other data. So.
Michael Fertik (55:40.717)
Okay.
Jeff Dudan (55:57.402)
to find the needle in the haystack, you have to ask the question the right way. You know, where is it like, what, what is the, you know, and, and now rooms and rooms and rooms of analysts are trying to, uh, used to have to try to figure this out and you would only hope that they would pull on the thread that was the right question that the data could give them the answer to. Where now with generative AI, it's, it might even ask questions that you wouldn't have even known to ask. Is that fair?
Michael Fertik (56:25.309)
Yeah, that's about right. Look, it's gonna, you know, we've seen AI answer and understand, for example, a team at Stanford has come to understand secrets of the human genome and of biology that have taken either decades or hundreds of years for us to understand. And they did it with, you know, by mining a data set and took, you know, weeks to do, including comprehending what particular genes do and how they express themselves and what diseases they can cause or cure.
Jeff Dudan (56:39.579)
Mm-hmm.
Michael Fertik (56:55.29)
That's astonishing one of the one of the
Jeff Dudan (56:57.366)
Yes, I bought tests for my whole family to do exactly that this last December. Because it can.
Michael Fertik (57:04.437)
We genetic disease profiling.
Jeff Dudan (57:08.234)
Yeah. And it's okay. You're, you're 22, you're 26, you're 19, but you know, you know, based on your DNA, uh, you know, you, you clear these things, you harbor these things. And if you do that, and then you're more predisposed for Alzheimer's or stuff like that. And the reports that came back were incredibly specific about like what they should and shouldn't eat, what they supplements they should take and why. It's incredible.
Michael Fertik (57:32.245)
I'm talking about something that's a little different. So what you're describing is in the same bucket, but I'm talking about something that's slightly different, and I'll tell you what it is. It's the machine in the case that I'm giving, and it's not super important to our discussion, but the machine in the case that I'm giving was able to understand what specific genes do, not for any given person, but for all of humanity. And they might release an enzyme in your kidney, and when that gene is not...
Jeff Dudan (57:54.293)
Oh.
Michael Fertik (58:02.161)
operating, then your kidney does not benefit from that enzyme. And when your kidney does not benefit from that enzyme, something might be going wrong or right with your body. And so just understanding what that particular gene does is something that the machine was able to isolate, even though it took decades for scientists doing research manually to isolate that same fact, right? But by ingesting millions and millions of pages of data and billions of rows of data, probably.
that machine was able to figure that out. That's AI. And so, you know, how do I make my garden grow might be a question you would ask. How do I solve the problem of the crows eating my blueberries might be a question you might ask an AI. And you know, for most topics, that's gonna be pretty darn good. It's gonna take away a lot of the responsibilities of some people who are kind of professional analysts. On the other hand, it's not gonna be perfect. It's gonna be a garbage in, garbage out. And...
If you're talking to an AI that has a certain political persuasion, because the people who made it are very lefty or very righty or whatever, it's going to give you an output that's very politically oriented or potentially politically oriented. So very famously recently, it was shown that OpenAI or similar could be asked a question, or Google AI, I think it was Gemini in that case, could be asked a question, who was more evil, Adolf Hitler or Elon Musk? Now, for people who are watching this, they'll see that there's a...
There's an image, there's a poster of Elon Musk right there in the kind of pride of place behind you, Jeff. And so I bet you haven't answered that question. I bet you don't think that Elon Musk is nearly as evil as Adolf Hitler, but this AI...
Jeff Dudan (59:32.967)
Yes.
Jeff Dudan (59:38.55)
Well, if I move slightly to the, no, I'm not gonna say that. Go ahead. Yeah. Edit that out.
Michael Fertik (59:41.917)
No, no, don't do that. Don't do that. Bad joke. Bad joke. Too soon. So that but the and he didn't mean it. Ladies and gentlemen, he did not mean it. But that but the joke is that Gemini did not want to answer that question. Gemini said, well, it's hard to say who's more evil. And so you can have an AI that is taught falsehood, or you can have an AI that knows how to mimic human behavior, but make stuff up. So AI was recently caught a lawyer was recently caught.
submitting a brief to the court using AI. And that AI had very cleverly mimicked all the briefs that it had ingested. It had seen all the briefs and understood the briefs and copied the briefs and mimicked the briefs and mimicked the voice of the briefs and so forth and so on. A brief is just a document you give to the court. And it turned out the AI had invented some precedents, invented cases and was citing cases that did not exist. Totally made them up. With, by the way,
very correctly constructed citations. They were just false. Not by the way, not by the way, bad interpretations of cases that existed. Cases that were just made up whole cloth. Okay, so if the AI can do that, and it can, then we're in for a big battle on our hands, which is probably closer to nuclear weapons level of challenge than to...
social media level of challenge, in which the AI is gonna be very smart, and gonna be able to spread falsehood, either as encouraged or engendered by the Russians or the Chinese or just political officers who run some of these bureaucracies inside large big tech, or will just make stuff up because it's funny and inconvenient to do so. And it's like, that's what you taught me to do. I just make stuff up. And I'm not trying to cause harm or chaos, I'm just doing it. And guess what? You asked me a question about how to operate that
car in this situation, I just made up an answer. And now you're driving backwards along the highway because you follow my instructions. You know, I'm making up a vivid example that's unlikely to obtain but there it is. So I you know, I am very bullish on AI but I also I also want your listeners to understand that at least in my opinion, there's a lot of a lot of room for the entrepreneurial person to be able to sit on top of these tools.
Michael Fertik (01:02:11.465)
and sit on top of businesses and make use of them and not be abused by them. And so I don't think that you should be scared of the future if you're hearing this broadcast or podcast. I think you should be interested in it and not worried about it in a way that paralyzes
Jeff Dudan (01:02:27.51)
Yeah. I was meeting with another tech investor and it was had a lot of success and they said, well, and they're a builder also. And they said, people that look to invest in us look for three things. They look for the rider, they look for the surfboard, but then they look for the wave. And they're the rider, they're the team with the experience that understands how to put it together. Surfboard's the tool.
Michael Fertik (01:02:46.221)
Oh cool.
Jeff Dudan (01:02:54.594)
And what is it they're building? But then the wave is the momentum. Like what is, what is going to be so compelling that these people in this tool can take advantage and be wild, wildly successful inside of that. How do you think about your investments that you make into these emerging private companies in the AI and machine learning and robotic space?
How Heroic Ventures Chooses Startups to Fund
Michael Fertik (01:03:18.153)
So, you know, I'm a really, it's a very good question. I'm a really early stage investor and I invest in venture capital. I think it's probably worth spending about two minutes on what venture capital is and is not. And then I'll answer your question very directly, but to set the table, to set it up, what is venture capital? Venture capital is a very narrow asset class that does not belong in most successful businesses. Most successful businesses do not need venture capital. They have, you can build it with sweat equity.
You can build it with a loan. You can build it with a little bit of your own money. Venture capital is for one very specific use case only. When you have a thing that takes some amount of money to build, because the people or the parts that are required to build it are expensive, and there's a period of time where your company might have no income, because until it builds enough of that thing, it cannot make any sales.
And then once you build it, the margins are extremely large.
Okay, so I'm not talking about 20%, I'm talking about 70, 80, 90, 95% margins, which is extremely rare. That's software, some hardware, and biopharma, biotech basically. The margins are enormously high. Then there have to be a couple other conditions met. And the most important conditions are that it has to be defensible and scalable.
So scalable means it can become very large. There are a lot of people who could spend money on this. Tens of thousands of businesses or thousands of large companies or millions of consumers.
Michael Fertik (01:05:02.069)
So that's a lot. A lot of people can spend money on this, scalable. And then it has to be defensible. So what is defensible? Defensible means that it's very hard for someone to copy it. And that can come from having some intellectual property that you can take someone to court on top of and say, look, you can't compete with me because I invented this and I patented it or whatever. Or that can be something that you have a unique proprietary data set, right? So you have a data set and you're a business, Jeff.
that begins to sound defensible. You have all these customers, all these franchises, and maybe that's defensible, okay. And maybe you've got a unique relationship with a vendor, right, you've got an exclusive deal with a really big school district, or exclusive deal with a really big company, or exclusive deal with someone else, that could be. Or maybe you've got a product that has a trade secret around it, like Coca-Cola, the most famous trade secret in the world, like six people alive.
at any given time know what the formula is exactly for Coca-Cola, right? Something like that. So if it's defensible and scalable, that means that you can sell to a lot of people and still keep your margins very fat. If it's scalable but not defensible, someone's gonna find you, copy you, and then they're gonna sell you, sell the same or similar product at a lower price, and then you're gonna have to reduce your price, and then your margins will get less fat over time. So venture capital, venture capital.
really only ever works for a company that requires a certain amount of capital to get going and will have no revenue, usually for some period of time, not close enough to cover its costs, in other words, and can be scalable and defensible. The nice thing about venture capital is if your company doesn't work, you don't have to pay it back. Right? It's amazing. God bless America. Okay. But the...
Jeff Dudan (01:06:54.154)
Right.
Michael Fertik (01:06:57.689)
The downside of venture capital is that you're selling a piece of your company. You're selling it basically forever. And you're selling it forever basically from the very first moment you started your company. So that's venture capital. Now what do I look for? I am a really, really early stage investor. I look for a company that has what we call a team and a TAM. So a team is obvious, who's working on it. And the TAM is the total addressable market. Is there a big, big honkin' market
that we think is gonna want this.
And if I can see those two things, that's usually the beginning of a yes to me. Now there's some other criteria, it's got to be something I can believe is defensible. And that goes to team because the team is a group of people who get what defensibility is and know how to make things that are defensible. And I invest very heavily in Silicon Valley and Israel. So I have a I have a bit of a relaxed geography since the start of the pandemic, because now everyone's an avatar, right? Everyone just exists on zoom.
You invest in companies where you don't even, or meet the guys, you just meet the over gals. Like you just see them on Zoom. And eventually you meet them in person a couple years later, like, wow, you are much taller than I thought you were. Happens to me all the time. And so I tend to focus on these two geographies, right? There are a lot of people who invest in India. I don't do that because I don't have any advantage there. For example, even though great companies coming out of India, great companies. I just don't know how to find them. I don't know how to qualify them the same way I can for Silicon Valley or.
Jeff Dudan (01:08:10.242)
Ha ha ha.
Michael Fertik (01:08:30.745)
America and Israel. So those are my focuses. Now, what I don't say, and this is something that you might hear people talk about, who are other professional investors. What I don't say is I look for a product market fit product market fits immensely important. Product market fit means this guy, this team, this gal, they have figured out what they need to make. And that's the product and they found the market, they know how to sell it and the people are buying it.
Well, why don't I need a product market fit? I'll tell you why I don't need it. Because by the time a company's got a product market fit, you've got one million investors who want to invest in it and they bid up the price and then I can't make money anymore, okay? That's too late. So, no, it's not too late for some people. Some of the best investors in the world with funds that are bigger than mine, they say, hey Michael, who's got product market fit? And I say, hey, Jack, hey Jane, I got this company here for you.
Jeff Dudan (01:09:13.958)
That's too late.
Michael Fertik (01:09:29.281)
You want to invest in that company? And sometimes they say yes. And they look to people like me or they look for other companies, hey, you know, who's got product market fit? But I am willing to go before there's product market fit. I'm willing to go when there's a higher level of risk. And sometimes, you know, you never get to product market fit and that's a fact. But when you do, oftentimes you get a really big markup from a really great fund and all of a sudden you're off to the races and you're much more valuable set of shares than I had when I invested.
Jeff Dudan (01:10:00.522)
When did you first take money or how did you stand up reputation.com? How long did you go before you took outside capital?
Michael Fertik (01:10:13.161)
Yeah, I took some friends and family money pretty early. I don't remember exactly how early but it's not a lot. It was very small as 10s of 1000s or 100,000 bucks, something like that. I don't quote me because it's not it's in that zone. I don't I don't recall exactly but then I took a little more, that's a little more we got some more traction a little bit more. And then a very famous VC in Silicon Valley found me and
Jeff Dudan (01:10:24.994)
Right.
Michael Fertik (01:10:41.385)
I had like a full year on the books at that time and I had like a million two or something like that my first ever year of operation was subscription revenue. And I had no idea how valuable that was. And also I realized after I looked back because I hadn't spent a year at breakneck speed, I hadn't breathed. I was like, he's like, hey, you got some financials? I'm like, well.
Michael Fertik (01:11:05.917)
I got this here shoe box, right? And so, and I got some receipts. And so, you know, I spent like, you know, a few weeks cleaning up the books, you know, and I realized that we had been cashflow break even or profitable the first year as well, which was, I mean, first year, first 15 months, whatever it is, don't quote me, but something about that. And I was, I couldn't believe it. And so, that does not happen every day. That was lucky. A lot of hard work, but lucky and also. And...
And then we were off to the races.
Michael Fertik (01:11:40.033)
And then by the way, the 2008 financial crisis hit and then everyone was like, well, the world's dead. Everyone's gonna broke. You're gonna be a waiter. And nothing wrong with being a waiter, but I was the CEO of a company, I had like 30 employees. I was like, well, crap. And I remember telling my employees, I remember coming out, because the 2008 financial crisis, you'll remember, you can cast your mind back. It was sort of like.
Jeff Dudan (01:11:40.183)
Fantastic.
Michael Fertik (01:12:07.617)
but no one really knew how bad it was until, like it was really upon us, then it was again upon us, and then it got really bad. And I remember after like, as the news was really bad and people got really sad and people got really worried and the news was really terrible, and they were layoff. And I came out and I said to my employees, like 25 employees, I said, look, we're not gonna have any layoffs. And I believed at the time. And sure enough, about five, six, 10 weeks later, I don't know what it was. Again, don't quote me, but about that.
I realized I had made a big mistake. This is now 16 years ago, so some of your listeners may be interested to know that I had made this mistake. And I had kind of made this sense of, I can't say I made a promise, but I made a sense of like, this is what I believe is gonna be true, and you don't have to worry about it for your jobs. And I realized I had made a terrible mistake. The world got so much worse so fast. If you...
Jeff Dudan (01:13:02.899)
That's right.
Michael Fertik (01:13:04.833)
did not live through the 2008 crisis. You may not know it was like as bad as everything except since the depression. And then the coronavirus pandemic for a year or half a year was even worse, but then the government's bailout was so vast that they were able to put us back to work and make the stock market go. But the 2008 financial crisis was worse because it was a depression in the financial markets that lasted for years.
Jeff Dudan (01:13:34.798)
That's terrifying.
Michael Fertik (01:13:36.009)
and terrifying and full illiquidity. It was a full ice age lockup of money. Money wasn't moving. It was the textbook example of a disaster. You know, you couldn't get a loan, you couldn't get investment, you couldn't write nothing. And so I came out and I said, look guys, I've cut my salary by 50%. I cut it, whatever, four or six weeks ago, whatever it was. It's not enough. I've cut all the candy, I've cut all the stuff. I'm making it up. I cut the air conditioning, whatever it is.
not enough and I got a fire, you know, I fired these three people or let these three people go or four people go or whatever it was. This is years ago. And so that was a moment I was like, well, Michael, you got to not say it until you're certain it's true. And I was a younger guy. Like I didn't, I really believed it, but I didn't, I wasn't careful enough with my words at the time.
Why Fertik Moved His Family to Paris (and What He’s Teaching His Kids)
Jeff Dudan (01:14:28.214)
I'm interested. You're living in France now. How many kids hold?
Michael Fertik (01:14:34.441)
Um, so let me not answer that question, but my oldest is 12. Yeah, but I will answer that question offline. I'm very protective of my family, but, but as soon as we turn off recording, I'll tell you all about my kids and all the details and all that. Yeah. Well, my oldest is 12 now. Yeah.
Jeff Dudan (01:14:39.21)
Okay.
Jeff Dudan (01:14:42.417)
Okay, no, fair enough.
Jeff Dudan (01:14:46.558)
Yeah. Well, I was more interested. I was interested in the, you know, what did you see that led you to move to Paris?
Michael Fertik (01:14:57.653)
Well, there came a time when I was ready with my family to leave California. And we decided for a number of reasons to leave California. We relocated to Texas and then, and that was a good fit for us. And then there came an opportunity to move abroad and we decided to take up that opportunity because my, um, my, uh, oldest two kids were of an age when that could make sense and I can still get them back for high school.
in America. And, you know, my oldest son, who is, he's now 12. I remember asking him, I asked him every six, 12 months, I said, Hey, you know, kid, you know, what do you think you want to do when you grow up? And you're allowed to change your mind, you know, after dinner or tomorrow morning? There's not a big commitment question. He says, he's probably nine at the time. Okay, Jeff, he says to me, Michael, sorry, he says to me, Dad, he's nine years old, says to me, Dad, you know, my whole life, I'm like, okay, fine. It's my whole life. I wanted to be a chef.
By the way, he's a really good chef. And I said, great. He says, you know what, Dad? I said, what? He says, you know, being a chef is a really difficult life. Owning a restaurant is a really difficult life. I'm like, well, I don't know how you came to understand that, but it sounds true to me. I think it's a difficult choice. But you know, if you love it, you love it. He says, so? I mean, the wording is important. We're in the middle of Palo Alto. We're living in Palo Alto, right? You have to understand what I've been doing my whole life, but his whole life. He says, well, Dad, I've decided I want to be an investor or a startup. OK?
So he wants to be an investor or a startup. So I'm like, oh boy, this kid is definitely a Palo Alto creature. So anyway, and anyway, so I, oh, another funny story. I invented the technology, just a company I sold, and for a while, the conversational AI company, when you talk to the computer, it talks back to you like it's a human. And for a while, one of the use cases was,
that we had an Alexa and we could talk to a pizza company about ordering, like how will you order a pizza? We wrote this conversational AI that could help us relay an order of your pizza order to whatever Domino's or Pizza Hut or whatever it was. And so I remember we had a friend come over to the house and my other son was probably six at the time. What does your dad do for a living anyway? He says, he orders pizzas on Alexa.
Michael Fertik (01:17:25.741)
That's what he thought my life was, ordering pizzas and the like.
Jeff Dudan (01:17:28.749)
Not completely untrue.
Michael Fertik (01:17:30.633)
not completely untrue. So, and then the other guy said, he does what he has to do. That was his other answer. So yeah, nice. Anyway, long story short, I had these two Palo Alto creature kids and I was like, look, I'm going to get them out of here and the world's changing and God bless, but I don't think I really need to be in Palo Alto anymore, in Northern California anymore. So we decided to make a move and go to Texas. And then we had this opportunity and I had some freedom in my life, thank God, to go, hey, where do you want to move abroad?
Jeff Dudan (01:17:35.27)
Oh nice. Yeah.
Michael Fertik (01:17:58.449)
Paris is a wonderful place. Many of your listeners will have been here or certainly seen in the movies and maybe want to come here. It's everything you think it is and some things that you don't. But the idea was to expose them to the big world. And maybe they can learn another language and maybe we can travel around Europe. And we go to Israel a lot and go to Israel more easily. You know, it's only a few hours by plane. And then we'll come back to America because we're Americans. We want to live in America. But now they've come back with...
a different perspective and a broadened perspective and maybe know the language and, and so forth and so on. And we'll move to Texas and live our lives in Texas, which is the plan. So that's what we want to do. But but the idea was really to broaden the kids and to say, look, there's a lot of different ways to live your life, a lot of different kinds of people. And you don't have to just think about being an investor or a startup.
Jeff Dudan (01:18:54.899)
Everybody needs an adventure in life and for at least for my kids I've really invested heavily in experiences and just get them exposed because you know it's similar to AI. Your kids really will make decisions based upon a subset of the information that's available to them and what they've been exposed to. And I think you know entrepreneurs come from entrepreneurial families and my dad was a.
had an engineering business, and I would say it was kind of a failed business. I mean, he kept it for a while, but it didn't scale. I mean, when he had clients come in, I'd have to put a sport coat on and go sit in a cubicle, so it looked like there was people in there and stuff. And raid the snack box and stuff. But you never know what they'll be exposed to on this incredible adventure that will speak into them, and then their life will be a tapestry of the-
Michael Fertik (01:19:36.189)
That's funny.
Jeff Dudan (01:19:49.418)
of the raw material we give them. So that's the best we can do, man. That's the best we can do. Well, hey, this is a bit.
Michael Fertik (01:19:56.749)
Well, God bless. God bless. I appreciate everything you're saying, Jeff.
Jeff Dudan (01:20:00.53)
Yeah, man. Hey, this has been great, Michael. I can't thank you enough for being on. Last question for you. If you could, if you had one sentence to speak into somebody else's life, what would that be?
One Sentence to Live By: Michael Fertik’s Final Words
Michael Fertik (01:20:15.585)
Have guts.
Jeff Dudan (01:20:17.966)
Thanks for watching.
All right, simple, two words have guts, got it. All right, well, thank you so much for being on Michael Furtick. This has been incredible. So nice to meet you. I've really enjoyed our time together today.
Michael Fertik (01:20:32.769)
It's my pleasure. I hope we'll meet each other in Charlotte one day.
Jeff Dudan (01:20:36.722)
We shall. You've got friends here, so when you come by, please look me up. We'll break some bread together. All right, sounds good. This has been Michael Furtick. You've been On the Homefront with Jeff Duden. Thank you for listening.
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