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.

 

HOWARD TULLMAN JOINS LISA DENT ON WGN RADIO TO ANNOUNCE THE LAUNCH OF WWW.SELFIE.CO - A NEW A.I. DRIVEN SOCIAL MEDIA PLATFORM

listen to the show here 

listen to the show here

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Unsubscribing Will Only Get Harder in the Age of AI. Don’t Let Your Company Be Part of the Problem.

The price doesn’t matter when you’re the product.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

JAN 12, 2026

Illustration: Inc; Photo: Getty Images

With the arrival of the New Year has come the inevitable onslaught of renewal requests, demands, entreaties and, of course, the slippery automated extensions designed to slip under the radar and convert low-ball promotional offers into full-bore subscriptions. Along with these ploys, and arguably as a product of them, come the seductive ads from subscription clean-up companies like Rocket Money which promise to quickly display on a single screen all your subscriptions—many of which they suggest with good reason that you didn’t even know you still had—and which their system will magically cancel at your direction and thereby save you grief, effort and hundreds of dollars as well.

You can decide for yourself how valuable and effective services like these are (Rocket claims to have saved its members over $2.5 billion) and do the cost-benefit calculation for yourself as well, but to be clear, they’ve clearly identified a serious problem which afflicts millions of us every year. And, needless to say, the magazine and service vendors themselves are the last businesses likely to or interested in informing you about your wastes of money.

Aside from the dollars saved, the real benefit (if these services work as represented) is that you avoid the pain, wasted time, and harrowing hurdles of trying to wend your way through the chutes and ladders, hoops and mazes, chatbots, and flat-out dead-ends in order to attempt to cancel these things on your own. And even if and when your journey finally delivers you to a human being or a chat window manned by a real person on the other end, you discover that you’re actually far from home free, unless you have a very thick skin and the ability to be unbelievably rude to some poor fool tasked with making you a series of increasingly desperate financial offers to retain or extend your subscription.

It’s pretty clear that these sad people who are actually paid to not take “No” for an answer have an entire set of scripts that they employ, and the tactics they use rarely vary much between companies. The standard ploys include guilt-tripping or otherwise shaming the subscriber, intentionally misunderstanding or misinterpreting the customer’s statements and desire; understating or concealing costs or terms, and dishonestly explaining the associated consequences and difficulties which may arise from a cancellation.

The only good news is that the Federal Trade Commission (largely pre-Trump II) has cracked down on many of these actions and operations in the traditional paid subscription and boiler room world, which has always been largely an analog operation and remains so today. The bad news is that there’s been a substantial gap in terms of acknowledgment of the similar concerns and in any enforcement in the new digital world of social networks (which are frankly far more addictive than any print magazine) where even the idea of “subscriptions” isn’t exactly applicable. And the matter is made even worse when there’s no payment involved. Regulators and legislators have had difficulty understanding the nature of the harms associated with the intended and manufactured difficulty that exists in cancelling “free” memberships or voluntary participation in social networks and in other especially addictive services like TikTok.

Of course, we’ve all learned by now that the reason you’re not asked to pay for your Facebook or Instagram or Messenger memberships or services like TikTok is that it’s your attention and mindshare that’s being sold by the tech companies to marketers, advertisers and politicians. The price doesn’t matter when you’re the product. This is the reason why it’s not simply been in the economic interests of Facebook and the other social networks to make it hard to quit; it’s a conscious, intentional and pernicious part of the underlying design and economic model of these businesses. And frankly, it’s far harder to drop these services or cancel your memberships than anyone would imagine until you’ve tried.

It can take as many as eight or more discrete steps (and the ability to ignore suggestions, blandishments, warnings about losing friends and other functionality and services) to finally reach the final stage where you can actually cancel your Facebook profile. The government has begun to work with some of the states to get a handle on this situation, but it’s slow going and nothing regulatory is likely to move rapidly over the next three years of Trump’s rule.

This may all seem like a relatively minor concern apart from the continuing damage all these services are doing to our kids, but that’s not the main reason I’m raising the issue. No matter how many times new technologies bite us in the collective ass because we launch and implement them before we fully understand their impact or consequences, we never seem to learn the lessons. Indeed, humans can ruin the spirit of just about anything if given the time and technology.

Right now, when nothing in our lives is more omnipresent and potentially threatening than AI, we’re learning that the tech guys have done it to us again. Facebook has built its AI chatbot into Instagram and WhatsApp, and there is no option to turn it off. Google searches result initially in an A.I.-generated result, and the stats already make it clear that the vast majority of all searchers never go beyond that first level quasi-generic answer to their queries. Even more problematic, Google has massively updated Gmail (3 billion users worldwide) and embedded its Gemini AI across the entire platform so the AI system will be reading all your emails whether you like it or not or, more importantly, whether you even know that it’s happening. Of course, if you are aware of this change and a complete gearhead, there’s an onerous multi-step process to shut the service off but, here again, you’ve got to know about it, find and implement it, and recognize that in doing so you will lose some other desirable and longstanding Gmail functionality.

The bottom line is that more and more of these new technologies are not being offered to new business builders as choices or options but instead are imposed on them whether they like it or not.  Only two industries call their customers “users” – tech software vendors and drug dealers.