HOWARD TULLMAN JOINS LISA DENT ON WGN RADIO TO DISCUSS HIS LATEST INC. MAGAZINE COLUMN

LISTEN TO THE SHOW HERE 

 

LISTEN TO THE SHOW HERE

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Why the Best Growth Move for Your Small Business Right Now May Be to Stop Expanding

Hunkering down and holding on tight to what you have is often the best way to survive a hurricane.

BY Howard Tullman

Nov 3, 2026

I spoke recently to a select group of small business owners and operators with revenues under $10 million who were looking for suggestions and some guidance on how they should grow their businesses in the next 18 to 24 months. I think that many of them expected an aggressive endorsement of rapid expansion and a host of tips on how to quickly and cost-effectively pull off that modest miracle. These are anxious times for all of us and entrepreneurs clearly have a bias for action, especially as a cure for anxiety. They clearly believe that doing anything is far better than doing nothing. And they feel that to reach the next level, they need to add people, structure and additional resources to their companies to support the growth that they’re hoping is just around the corner. The truth is that hope is a lousy strategy. You get what you work for, not what you wish for.

Today, the best way to secure and save the business that you currently have may be to slow down. Having lived and suffered through the pandemic with dozens of businesses; having endured the ups-and-downs of more bubbles than I care to recall; and facing the next two years with the likely prospect that the political and economic situation will be even more abrupt, uncertain, irrational and inconsistent given our demented, immoral and corrupt government, I just didn’t have the heart to urge them on to greater heights, more serious commitments and expenditures, and larger challenges at this point.

And while I have often said that you can’t save your way to success and that the greatest opportunities for market expansion are often found in the worst of times, I believe that we as entrepreneurs and new business builders in a country that’s been roughly turned upside down may have never faced such an unclear, risky and perilous time. I’m not sure right now that any of us is looking for more change or disruption. Hunkering down and holding on tight to what you have is often the best way to survive a hurricane.

And actually, at the moment, there are plenty of things that you can do which will be additive and productive for your business but racing off in some direction just for the sake of keeping busy isn’t one of them. Busy-ness isn’t good business. So, here are a few rules and suggestions about what not to do to help save you and your business from yourself and your best/worst instincts.

Go deep, not wide

Understand that the lowest-hanging fruit and the most likely avenues for additional revenues are your existing customers. Don’t take them for granted and don’t assume that there’s not more money to be found and extracted. Even your best salespeople tend to be looking for the next sale rather than securing and building on current relationships, using their present knowledge of and connections to their customers to offer further products and services responsive to their particular needs, and actively operating to grow with their users and clients rather than having them go elsewhere when their needs and requirements change. Conquest marketing is expensive, land and expand efforts are right in front of you.

Make sure the whole team is telling the same simple story

Stick to your knitting and make sure that your people aren’t overpromising, changing the basic terms and conditions of delivery, or—worst of all—trying to customize your offerings to close a sale and ending up committing to some unique and bespoke and costly version of your product or service. Complexity is the enemy of execution. You can tell when a startup has begun to mature and that’s when every sale doesn’t have to be completed and closed by the CEO. Your company will never scale successfully if every deal is a one-off variation. Focus, do a few things really well, and don’t be tempted to change your program to suit someone who may not even be a serious prospect. Save me time or money, make me more productive, or help me make better decisions and I’ll love you forever. Nothing else really matters.

Don’t try to do things cheaply that you shouldn’t do at all

The best business builders that I know say “No” all day long to all kinds of offers, invitations, tempting shortcuts, and cosmetic changes which might even make folks feel better in the short run, but which are painful and costly deflections which can cripple your company down the road. You don’t want to get a reputation—inside or outside your walls—for compromising, cutting corners, settling for less than you should, or doing a halfway job. Don’t waste your team’s time and resources by saying “Maybe” when you know you want to say “No.” “No” is a complete sentence and doesn’t require explanations, excuses, or made-up justifications. It’s easy when cash is tight and the choices are complicated to try putting lipstick on a pig. But the pig still looks like a pig, and you look like an idiot.

Use A.I. tools to streamline and improve your processes and to augment, not eliminate, your people

In case it’s not obvious, to date, we have seen almost no increases in productivity or reductions in headcount in the vast majority of U.S. businesses because every competent management team has concluded that you still need a human link in any and every A.I. decision and implementation chain unless you want some random or rogue machine to blow up your business or blow off your customers. Use A.I. tools to help your people get better and smarter about what they’re doing instead of thinking that you’re going to get rid of some of them because you spent a lot of time and money building your team, they’re experienced and loyal, and they know a great deal about the nuts and bolts of your operations. Putting A.I. beside talented people with substantial domain expertise is the way to produce the best results for now.

Don’t fall for the warehousing fallacy – Don’t hire for the future now

Yes, sometime in the future, if and when your business grows, you’ll need some HR help, you’ll need to grow your back office, you’ll definitely need to get some additional tech talent and you might even need a strong CFO to tell you to your face that what you’re planning to do and spend money on makes no sense. Every good business needs both an accelerator and a brake. But you don’t need to hire now for the future even if you are seeing terrifically talented people walking around. Entrepreneurs think that they can hire good people and then find important work for them to do—I call this the warehousing fallacy—and it almost always results in costly failures. Not just in dollars and cents, but also in company morale and momentum, and in damage to the culture of trust and loyalty that you’re trying to build. Lateral hires are really hard—startup cultures are both more fragile and more resistant to change than anyone imagines. And having expensive people sitting around on the sidelines while everyone’s waiting for the company to really need their talents and services is a bad bet for all concerned. In many cases, those very people leave of their own volition because they see better and more immediate opportunities elsewhere. Try to grow your own talent before you start looking elsewhere.

 

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Want a Better Job? The Smartest Place to Start Looking Isn’t Where You Think

The world doesn’t wait for you, and it pays to have your current employer at least a little concerned about the importance of keeping you.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

Oct 20, 2026

If you’re happy and fully satisfied with your current employment, go read something else. But also drop me a line and let me know what it is that you must be eating or drinking to be so content, because you’re one in a million. On the other hand, if you’re eager, ambitious, and smart enough to always keep one eye open for the next opportunity, then read on because I’ve got a few tips for you.

I’d start the conversation with my time-tested caution: you never know who’s going to bring you your future. Be open, be observant, don’t be a snob, and understand how quickly things are changing around you and how new doors and career paths are opening every day. If you’re not paying attention and at least passively in the hunt, the best bets will pass you by. As Ferris Bueller noted: “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” And also, be ready to bail or bolt. The world doesn’t wait for you. And it pays to have your current employer at least a little concerned about the importance of keeping you.

Step one in any job search is to remember that your prospects are 1,000 percent better if you’re presently employed while you’re looking for the next step rather than if you’re out on the street or sitting at home. Don’t jump ship before you’ve got a safe and secure place to land even if every day at work is getting tougher and tougher to take. And even if you’re the world’s most conscientious employee and hate slackers who quit without leaving. It’s still OK to spend a little of that long day looking out for yourself. You may have loved the company, but these days the company will never love you back, so you’ve got to be the one looking out for yourself and your family.

Step two is, before you spend any time looking elsewhere, take a look around and see what opportunities may be available—vertically or laterally—within your own shop. These are the folks who know you best—strengths and weaknesses as well—and there may be slots opening up within the company in other areas or divisions or even locations that may offer greater challenges, better compensation, and a chance to keep growing in a new work environment with some new team members as well. AI is changing the game entirely and different sets of skills will be required in various areas of the business that are being radically restructured. Your talents and liberal arts background may be far more portable and valuable in a world where prompt engineering is just as critical as mechanical engineering and creativity may trump the whole lot.

The best leaders always know who the key performers are within their organizations and also know that an employee’s great attitude, grit and a solid work ethic are much more important to their company’s long-term success than the pain involved in switching someone’s roles or positions—not to mention the costs of finding a suitable replacement if they leave. So, shop around inside and check out the internal prospects. If there’s nothing there, you’ve spent a little time and probably gotten a better handle of what you’re really looking for in your next job.

Step three is to try to get a short meeting with an executive at one of the major headhunting firms. Find a connection, something in common, some excuse to ask him or her to spend 30 minutes with you and give you a little advice. In the best case possible, they’re in the process of looking for someone just like you and it’s Kismet, fate or simply good fortune. But it’s not very likely. On the other hand, getting your story and your resume on the radar and in the hands of the right people is very important and it’s a great way of networking as well. Finally, these people are trained sharks and sitting with them and pitching yourself is unbelievably great practice even if nothing else comes from it.

Step four is a don’t. Don’t put your resume online or list it with even the biggest of these volume operations. It turns out that there’s just about nothing more damaging to your reputation and perceived value than joining the desperate crowd even if your credentials are great. You can be the biggest fish in the pond, but if the pond’s a cesspool, you’re not doing yourself any favor. Honestly, much like dating sites, the success stories are few and far between at the higher salary levels, the horror stories are voluminous, and the black mark on your resume is largely indelible. Word of mouth from peers, friends and relatives is a far better channel.

Finally, be persistent. Once you’re in the door at a place you’d like to work, don’t take “No” for an answer from someone who can’t say “Yes.” Get yourself in front of the ultimate decision maker and make your pitch there. Great entrepreneurs will tell you two things: they try to hire the best people and worry about positions later; and over their many years of hiring folks, they’ve found some of the very best employees in the strangest and most unlikely places. Find a way to take your best shot. You miss 100 percent of those that you never try.

HOWARD TULLMAN JOINS LISA DENT ON WGN RADIO TO DISCUSS HIS LATEST INC. MAGAZINE ARTICLE

 LISTEN TO THE SHOW HERE

LISTEN TO THE SHOW HERE

HOWARD TULLMAN JOINS LISA DENT ON WGN RADIO TO DISCUSS HIS LATEST INC. MAGAZINE COLUMN

 

LISTEN TO THE SHOW HERE

LISTEN TO THE SHOW HERE

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

Your Pricing Data Shows What Customers Did. Kapnova Wants to Reveal What Will Make Them Buy Next

You could look backwards for a lifetime without adding materially to your decision-making ability.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

Oct 13, 2

One of the most ironic aspects of the AI revolution, as the latest frontier models race to lead us into an increasingly uncertain future, is that all our knowledge (and every scrap of data used to train these engines) is based on the past, but what we’re looking for guidance on from these tools and new technologies is making all kinds of decisions that are 100 percent about the future.

Personalized pricing, which targets each of us as individuals defined by our past purchasing predilections, is emerging across the board with some modest resistance. It feels more every day like the present is becoming the future faster than it is becoming the past. Every autocatalytic change seems to accelerate the next change coming rapidly down the line.

At the same time, noted scholars, MBA professors and professional investors have all repeatedly cautioned us and advised prospective entrepreneurs and ambitious innovators to largely forget about the past. Why. Because no one has become successful in the past. In addition, it’s abundantly clear that we all have a tendency to remember the past as far more glorious and pleasant than it was. Millions of us long for those imagined days of old when the whole world seemed to move more slowly. There’s the past and there’s the story we tell ourselves about it. In fact, too many business owners, operators and managers today spend their time looking forward to the past and, as a result, continue to fall further behind their competition.

At best, we’re told that we should be concerned about the past only as a prelude to the future. It’s critical to remember your past mistakes and address them so you don’t repeat them, but being a prisoner of the past or letting it guide your future is a bad bet. Virtually every financial investment document written in the last century has contained these prophetic words: “past results are no guarantee of future performance” or something very similar which is boilerplate language actually required in many cases by applicable provisions of the securities laws. And yet, all the major LLMs actually have virtually nothing else to base their operations on.

So, I was intrigued to learn about a new company called Kapnova, which is an AI decision-intelligence business focused on predictive pricing for consumer brands. The Kapnova team has built a series of new tools, agents, simulations, and analytical systems based largely on research coming from MIT that takes an additive approach, which doesn’t ignore all of the past history and behaviors or the extensive correlations that can be drawn from that data, but adds specific emphasis on what they call causal inference—basically not simply recording and reporting on what happened, but focusing on figuring out why certain actions were taken and what the specific drivers and levers were which caused those choices and decisions.

Once you’ve identified the key influences and inputs to specific consumer actions, you can build models and tests to determine how incremental changes in the variables, expenditures, and volumes of pricing, promotions, marketing efforts and inventory allocations can all act to increase revenues and profits. It’s another level of inquiry and differentiation that feels like a sniper scope approach rather than a shotgun. Every LLM engine takes all the past tonnage and grinds it for correlations, but we’ve been taught from Day One that correlation alone never adequately explains causation.

Kapnova’s offerings and solutions combine econometrics, causal science, and human analysis, enhanced by the use of specialized agents. The agents apply the conclusions drawn from testing prior actions and spends in constant reviews of marketplace conditions and changes and then identify and highlight instances where strategic and timely changes in different variables will likely optimize the results. Opportunities are called out and scored for the client teams to make final determinations, but the speed of the operations isn’t belated or after-the-fact. It provides real time suggestions and directions.

How far can prices be raised on a given product before demand falls enough to impact overall revenue? Which ad spends are working to produce incremental sales and which discounts and promotions are actually costing the client money when the customers would have purchased regardless of the price? To be clear, you could be looking backwards for a lifetime without adding materially to your decision-making ability with respect to ongoing current changes.

We can’t go back and change the past, or the actions and decisions that were made that may have led to unfortunate results, no matter how much we may wish to do so, but it’s never too late to change the future. Kapnova offers a look ahead at what the future is very likely to hold for consumer product pricing. We’ll never get better if we keep doing things the same way that we did in the past.

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Walmart and McDonald’s Reveal the Real Risk of Letting an Agent Shop for You

Can a consumer’s AI agent navigate powerful price-setting agents on the other side of transactions?

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

Oct 6, 2026

As we enter the Agentic age, each and every day some tech vendor, social media site, or software provider is offering us free, simple and painless tools that will allow us to have more and more of our boring, repetitive and largely mindless day-to-day tasks and activities handled for us, without taking up more than a few minutes of our precious time.

Whether it’s Muse from Meta, dots from OpenAI or Instinct AI from some 23-year-old guy that no one’s ever heard of (with billions in funding), the onslaught of AI-infused assistants, agents and enablers has begun in earnest and shows no signs of slowing down any time soon. I’m not in a position to offer any specific advice at this point or pick a favorite, because no one really knows what’s behind these officious and aggressive little operatives—or what exactly they’re doing with whatever data and other personal information you’re encouraged to turn over to them.

The sizeable lists of uses, consents and authorizations that you’re asked to agree to in order to get these things rolling is unclear, way too broad, and a little frightening, because very few of us even understand what we’d be signing up for. The terms and conditions are just as dense and unintelligible. But if you’re game to experiment, I would caution you not to turn more than one of these irritating, invasive and omnipresent creatures loose on your life unless you are a glutton for punishment and have nothing else to do with your time beyond constantly responding to inquiries, requests, updates, suggestions and demands from your new “time-saving” assistant.

This whole “trust me” approach sounds like a slippery slope and a strategy that ultimately depends on our own laziness, where we get battered down by the incessant flow of requests for permission and consents and we just bag it and say “do your best” or something equally perilous. Remember that improved speed, access, and convenience were the bad trades we made long ago in exchange for our privacy. This new wave of inquisitive helpers sounds even worse to me.

Letting an agent do your shopping for you is a whole new can of worms and reminds me of Jeff Bezos’s observation that consumers don’t want to negotiate the price of things every time they shop. The unstated predicate for that comment is that you’re supposed to trust Jeff’s algorithms to get you the best prices. But what if the prices are moving targets and, worse yet, are based upon some composite persona that various vendors have developed to describe you, your purchasing behaviors and your purchase history. How is your agent supposed to deal with powerful price-setting agents on the other side of transactions? Who’s going to decide who got the best deal?

All of which brings me to the latest face-off between Walmart and McDonald’s in regard to their respective real-time pricing strategies. Walmart takes the high road and says that the price for the product is the price and it’s the same price for all customers. McDonald’s is using AI to recommend personalized menu prices which I would call predatory since—by their own admission—these prices are based on transaction data and local willingness to pay. Let me know when you find those folks who are happily willing to pay more for the same product, because I have plenty of other things I’d love to sell to them.

And, just to add to the mess, you need to understand that non-human actors are already responsible for roughly 55 percent of all global web traffic. We’re talking about scripted agents, automated bots, machine-driven commercial transactions, and, of course, AI agents. Humans are already in the minority on the web and now we’re being invited to take another step back and let our helpers do the job for us. If you think that these tasks are getting easier or clearer, you haven’t been to the airport lately.

While gas prices may seem high, try paying $11 for a single copy of any of the glossy weekly magazines at the newsstand. Just to be clear, it’s not like any prices are immutable and fixed objects these days. Amazon’s systems change the prices of millions of items virtually minute-by-minute to react to competitors pricing changes. Even the publishers themselves don’t know what’s happening with their own pricing. Subscribing for a year to The New Yorker at a discount online site will allegedly save you $253 compared to what they say is an aggregate newsstand price of $422 (or $9 an issue), even when the cover of the magazine itself says $10.99. The actual subscription price you’ll be paying per issue for your 47 issues a year is $3.60.

I’ll leave it up to you to determine how your shopping agent is going to make sense of pricing schemes like these, in-store couponing and daily discounting, membership price cuts, and a host of other promotional offerings in every store and even more aggressively online.

The bottom line for the moment is probably a word or two of caution before you turn over the purse strings to any of your accounts. Saving time may generally be more valuable than saving a few bucks, but not if you have only the vaguest idea of how intelligently your cash is being spent.

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

HOW TO KNOW BEFORE YOU GO

One of the reasons that the failure rate of new restaurants is so high is because - even in cases where new operators are moving into existing locations - so much of the necessary capital investment is required upfront for renovations and/or new construction. You’ve got to build out the entire business before you know if the “dogs” are going to eat the dog food, say nice things to their friends, and keep coming back. A rule of thumb is that a successful restaurant needs to convert about 15%-20% of its customers into regulars if it’s going to make it through the first full year of operations. These required retention numbers may have even increased now because fewer diners are drinking as much as they did in the past so each customer is likely to be less profitable. (See https://www.inc.com/howard-tullman/60-40-restaurant-rule-food-beverage-glp-1-ozempic-wegovy-mounjaro-alcohol/91323202 .)

And, as we all know from the media’s obsession with opening weekend box office results, it’s pretty much the same front-end loaded situation with film studios making expensive motion pictures and then hoping that the crowds show up at the theatres so that the players don’t lose millions of production costs and marketing dollars essentially on Day One. Of course, there are occasional attempts with early screenings and test audience previews to get a reading on viewers’ likely reactions and, in some very costly cases, to actually attempt to shoot additional or alternative scenes and re-edit sections of the films. But as noted writer, playwright, and filmmaker David Mamet once said about fixing others’ failed efforts: “it’s
hard to polish a turd”. Once a movie is in the can, it’s a crapshoot at best as to whether it’s gonna be a triumph or a tragedy. But at least it takes a while for the ultimate reckoning in the film business because movies take years to finance, approve, and actually get made.

In the advertising world, where social media commentators and trolls lurk every day around every corner of the web, expensive new ad campaigns which suck, offend some segment’s tender sensibilities, or have the “wrong” spokesperson are condemned, roasted and rejected the same day they are released and sometimes (in the case of Super Bowl ads in particular) even before they are widely distributed and shown to the general public.

Millions of production dollars are flushed down the toilet, media buys and expensive marketing commitments are wasted, and – in some especially problematic cases – as  PepsiCo (See https://en.wikipedia.org/wiki/Live_for_Now ), Kendall Jenner, and many others have learned   - even more dollars are spent trying to make amends, repair wrecked brands, resurrect reputations, and apologize to millions of people who may not have even seen the offensive material in the first place.

While there are no guarantees or crystal balls in the ad biz, I wrote many years ago about a company called Dumbstruck (www.Dumbstruck.com), an emotion analytics company founded in 2018, that had developed some crucial technology which reviewed, evaluated and analyzed both proposed videos and actually produced ads in order to determine how that content would be received by the target populations and how they would respond to it. (See   
 https://www.inc.com/howard-tullman/catch-me-if-you-can.html). The basic idea was to keep offensive and ineffective materials from ever reaching the marketplace. As I said at the time, it’s much smarter to avoid the potholes than to get a great deal on the cost of the tow truck that pulls you out of the ditch.

But in too many cases, while Dumbstruck’s impressive tools (which measure emotional, behavioral and cognitive reactions to displayed material) could highlight the prospective issues and shortcomings of completed videos, actually making those improvements could require costly edits or reshoots that campaign timelines and budgets simply didn't permit. The insights could still inform media decisions and future creative development, but improving the finished asset itself wasn't always practical. The horse had already left the barn. So, the tech worked, but the insights it provided often came too late in the creative process to provide its clients with the ability to cost-effectively fix the problems that its software had identified.

The good news for the clients – but another unfortunate blow for the traditional creative business – is that through a new technology partnership between Dumbstruck and Luma, which operates a multi-modal general intelligence platform based in California, there may finally be a fast, cost-effective and readily available approach the companies are calling Creative Intelligence which combines Dumbstruck powerful insights and observations about which elements of a given ad will work and connect with viewers and which other parts need to be revised, eliminated or enhanced with the AI-infused tools called Luma Agents that Luma has built which permit editors to: (a) implement the Dumbstruck recommendations and changes in real time into the existing video materials without extensive delays or costly reshooting of scenes and (b) even more importantly - and somewhat frighteningly at the same time – to digitally create and add elements, props, environmental effects and even new actors to the video on the fly and in the moment. The new system combines AI rendering abilities with human response data and applies all of this to the content being developed and enhanced. When the content is revised, updated, and improved, it is retested by Dumbstruck to confirm its value, impact, and effectiveness.

It’s actually hard to imagine a more enormous and disruptive offering which is entirely likely to upset the entire ad creation and production industry in short order. If you can write it and envision it, it’s becoming very clear that the actual video materials including all the personnel and props can now be digitally generated in 4K quality in a matter of hours rather than weeks with all of the obvious cost and time savings which that kind of technological advancement offers. What’s more, specific variations of the content can be made at little or no incremental cost to be directed to slices and segments of the overall audience. But the cost-effective abundance of content and the ease of production isn’t really the critical question, which is whether Dumbstruck’s technology determines that the finalized content will get the job done and resonate with the consumers. After all, at the end of the day, the ultimate goal is to sell something.

If the traditional ad biz wasn’t already plagued by the same basic time crunches, talent costs, and production issues that many other industries are facing as well as also being under new serious pressure from the rise of inexpensive and ubiquitous user generated content (UGC) as well as A.I. slop that are swamping all of the available channels (See https://www.inc.com/howard-tullman/ai-trend-traditional-ad-agencies-creators-influencers/91366965.), the Luma-Dumbstruck technology partnership may be one of the final blows to the old leisurely days of Madison Avenue when who you knew was much more important than what you knew and could do. A long-past time when how a particular ad did for a client was a matter of good fortune rather than careful planning, precise execution, and after-the-fact analysis and accountability.

Today, thanks largely to Dumbstruck and Luma, advertisers can now “know before they go” exactly how their ads are likely to resonate with their target audiences and also have the immediate ability to improve their ads before significant media dollars are spent.

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Microsoft’s Massive Xbox Downsizing Signals the Brutal Reality of the AI Revolution

We’re beginning to see the secondary and other follow-on impacts of AI.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

Jul 14, 2026

 

Sony’s PlayStation has been the global market leader for years, while Microsoft’s Xbox has been a distant second even after failed attempts by Microsoft to make its games a visible presence in the desktop world, where it clearly dominates the office installed base worldwide. Both Sony and Microsoft missed the migration of gamers to small mobile devices, where Nintendo prospered for a while—even before the phone revolution completely changed the video gaming space.

Now, we’re in the early innings of another sea change where the major tech players in the gaming industry are realizing that they no longer need armies of programmers, designers and developers to build and deliver the next generation of games. This is due to AI, of course, but also because the new games—mainly mobile—will be so lightweight and rapid as a result of the AI enhancements that there will be no need for any kind of bulky and costly game boxes or platform devices. Finally, as is the case across dozens of industries these days, the cost of the chips used in these boxes has been driven skyward by the adjacent and competitive demands of the AI companies for product that has cut into margins and may ultimately result in price increases at the worst possible time.

The latest salvo in this latest war of enforced attrition was last week’s announcement that Microsoft was making major changes in the Xbox video game business which entailed specifically cutting the Xbox workforce by 20 percent—about 1,600 employees now and another 1,200 plus over the next year. More importantly, the company is largely exiting the studio space, where it spent billions on expensive acquisitions not too many years ago.

The personnel growth in the MSFT games division was massive while the overall demand, player base and playtime all decreased substantially. It turns out—as with many other pre-phone and streaming activities—that millions of gamers would rather watch the play of truly talented players on YouTube than be second-rate participants in multiplayer competitions or simply play older games at home by themselves.

As far as the various studios are concerned, a few big ones like Activision Blizzard will shrink but remain, some others will simply be shut down, some are being encouraged to spin off and go off on their own with temporary support and assistance from Microsoft, and a few will remain until they too can be responsibly booted one way or another or quietly sold off to other buyers who right now seem to be few and far between.

But the most important takeaway from this highly visible and intentional effort at downsizing one lagging division to help offset enormous commitments and investments elsewhere in the enterprise—particularly in AI capabilities—is that we’re beginning to see the secondary and other follow-on impacts of the AI revolution. Thousands of Microsoft employees didn’t just lose their jobs because the AI tools could build new games, faster, cheaper and even more compelling than the former workers, they were also directly dismissed because the sales, marketing, manufacturing and promotion efforts of the entire video game division were shrinking and Xboxes were losing share and playtime as the gamers went elsewhere and the old boxes lost their sway and value.

This is only a single example, but I fully expect that we’re about to see many other industries rapidly roiled by similar advancements in process and speed or response time which will permit—in the name of speed, efficiency and massive cost savings, the wholesale elimination of entire groups and departments in businesses which will simply no longer be necessary because all of their functions in the value-creation chain will be substituted for with new AI-infused technologies. I’ll be writing shortly about a staggering combination in the advertising industry that brings together two powerful technologies and will completely upset and reorganize the ad creation business into a faster and cheaper system, which will also create more engaging and effective products.

It’s clear that a new form of M&A is already actively helping to connect and combine disparate companies with tools and services that are addressing common overarching problems in industries like advertising, and it’s also clear that these individual companies aren’t likely to build end-to-end systems by themselves in a timely fashion whether through lack of capacity or all the necessary resources or because they have been so deeply focused on solving their segment of the overall solution that they didn’t realize that a better and more robust and compelling solution could be offered by combining multiple offerings into a single comprehensive process.

 

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

The 1 Thing AI Still Can’t Do Better Than a Human (and How Startups Can Use It to Build a Moat)

As AI kills the traditional software moat, this strategy can help startup founders survive.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

May 12, 2026

 

For quite a long time, the most common assertion regarding the threats presented by AI has been that even the most advanced systems will never reach the point where they will replace humans who are creative and innovative and who are designing new ideas, products, and solutions every day. At the same time, these are the very folks looking most anxiously over their shoulders at the oncoming onslaught.

To the extent that millions of these new ideas are never commercialized or even implemented—and worse yet, that other millions of these concepts turn out to be nothing more than incremental changes, enhancements or extensions of existing products and services which essentially add nothing to the aggregate base of human knowledge—it’s no great loss to humanity that these kinds of menial materials will soon be left to the tender mercies of AI-driven applications and programs. Ideally, getting rid of the scut work will free up folks to do more challenging and valuable tasks. Hopefully sooner rather than later.

The absolute flood of AI slop that’s already overwhelming every social media channel and other information delivery system serves as the first of many proof points in this regard. If humans who previously toiled in the creation of massive mounds of this kind of promotion, media, marketing and advertising crap are soon replaced by machines doing the same work more efficiently and economically, there’s an argument to be made that we’ll be doing those poor impoverished souls a favor to put them out of their misery so they have some prospect of finding meaningful work. And it’s not like the ultimate AI-driven output is likely to be materially better or worse. The truth is that you can’t polish a turd no matter how hard you try.

More recently, there has been a despondent group of technologists who dejectedly argue—especially because AI has proven so overwhelmingly adept at coding—that there are simply no longer any barriers to the advance across the board of these technologies. They believe that even building the best and most novel software offers an entrepreneur, a new business builder or even a senior and highly talented developer no sustainable moat or substantial protection from readily available AI tools simply copying, rewriting, reverse engineering or otherwise duplicating any of their new offerings and solutions in a matter of hours or days. How accurate this threat turns out to actually be is an open question, but it doesn’t take much talk like this to scare away early-stage investors and prospective employees. Years ago, the fear was that Microsoft (and then Facebook) would either buy you or roll right over and crush you. Today, AI is the new boogeyman.: 102006)

So, the real strategy for software startups looking to survive beyond only a momentary flash in the pan seems to be a two-fold approach. First, take what you need in the way of funding but stay lean and don’t be a pig in terms of raising capital because that only makes it harder for you to pull off the easiest of the most likely positive outcomes. In these crazy times, if you hit on a compelling idea and can build an early viable offering, you want to always have one eye on a quick exit.

I call this plan: Build to be Bought. You want to make sure that, when an eager buyer shows up, you haven’t created too many financial or other impediments to an attractive sale which can get in the way of giving your investors and your team a great return and give you all the ability to happily move on to the next challenge.

The second plan, if you’re planning to stay in the race for the long run, is to keep moving forward and head to where the machines can’t follow. Your most effective moat is that you’re constantly in motion and that you’re always at the tip of the spear, which is essentially and inevitably the point of human contact and interaction. This is hard, but not as difficult as you might imagine because what it translates into is always being focused on and building to the front end—upgrading, simplifying, and extending the points at which the end users access and interact with your product or service. That relationship which is so central to every part of our lives will never be fully appreciated and mastered by the machines because they don’t appreciate that we’re never going to be willing to fully abdicate our actions to any of our devices or machines.  

The machines keep getting swifter and smarter, but they will never bridge the final space which will always be defined by EQ emotional considerations (the user interfaces) rather than IQ technical attributes (the operating core). We see this dilemma every day when prospects are presented with and swayed by powerful utility claims and new levels of agency and then are quickly and totally turned off by the substantial technical implementation and onboarding challenges which they never signed up for. New users and even early adopters don’t want to build these things; they just want them to work. They don’t want to read a manual or learn a new trade or even invest a reasonable amount of time learning the basics.

This is where AI falls off the cliff because the machines’ tendencies are always to growing complexity, increasing bells and whistles, and expanding functionality while the target users want simplicity, rapid access, obvious controls and inputs and useable results and outputs. This is the old curse of engineers who are building to impress their peers and not to satisfy the real needs of their customers. It’s the reason that less than 5 percent of the tens of millions of users of all of the major Microsoft products never use or even discover 95 percent of the bloated and buried functions and features of the software.

The moat that still makes the difference and the key to sustainable success is to be constantly focusing on the quality of the end users’ experience, building customer confidence and continuity, and managing and meeting or exceeding the buyers’ expectations. The goal is simple: you want the competition to find your warm campfires and by then, you’ll be over the next hill.