By Brian Hieggelke
Howard Tullman is stepping down as CEO of 1871 in a few months, and even though he’s in his early seventies and has a lifetime of entrepreneurial achievements behind him, our conversation spent no time on the retirement motifs of golf, annuities or recreational travel. Tullman is understandably noncommittal on what comes next, other than continuing with his venture investment funds, advising 1871 and teaching, but you can expect there’s a “next.” He’s not retiring, but instead sticking to his lifelong tendency to move on to the next gig every five years or so. Since he took the helm at 1871, the hub for Chicago’s “technology and entrepreneurial ecosystem,” it’s grown dramatically and he’s ready to pass the baton. “When I got here, it was about one-hundred companies,” he says. “Maybe it started with fifty companies. Now it’s 500 companies, 2,000 people a day, 170,000 square feet of space. It started with 50,000. And it’s a highly profitable business, and it’s sustainable, because it’s not dependent on the city or the state or really anything.”
Tullman’s a classic serial entrepreneur, but he did not start out on that path. The St. Louis native moved to Chicago to attend Northwestern, followed by Northwestern Law School. He practiced law for ten years before he realized that his calling was business. He took his frustration with the state of data-based research offerings, then mostly available in periodically published, weighty and expensive tomes, and started a database business around the idea of real-time information, called CCC Information Services. Forty years, thousands of employees and billions of dollars of economic value later, that company remains in business in the location where Tullman started it, the same Merchandise Mart that also houses 1871.
The sort of interesting anecdote of the CCC story was the first venture fund that invested in CCC was called at the time Golder Thoma,” Tullman says. “The youngest guy on the file was Bruce Rauner. He was the bag boy. He was the guy walking around, and he’s now the governor, right?”
After CCC, Tullman immersed himself in a succession of technology-based businesses, from Imagination Pilots, a CD-ROM company where he made Hollywood connections when he licensed popular movies to become games, to JamTV (which became Tunes.com and later, eMusic), an early entry in the digital music universe. From there, a series of web-based business, including Xceed, where he found himself and his team locked in New York hotel rooms secretly building the web site for the “Survivor” TV show when 9/11 took down the World Trade Center just blocks from his Woolworth Building offices.
Back in Chicago, he took over ailing Kendall College and moved it from Evanston into the city, then launched Experienca, an educational center designed to teach entrepreneurship to kids and, finally, Tribeca Flashpoint.
“It grew out of repeated instances of parents saying, ‘My kid doesn’t want to go to a regular college. He hates everything but digital. He’s in the basement’,” Tullman recalls. “So I said, well, we’ll build a two-year, high-end, vocational school. Just as Kendall was. Kendall was a two-year, high-end vocational school in culinary and hospitality. And these were people getting jobs. And that was the design of Flashpoint.”
He then sold both to Laureate International Universities, getting out of for-profit education just before political pressure knocked the wind out of the business. At that point, the high-profile 1871 was ready for him.
Before 1871, Tullman was as well known for an art collection featuring provocative paintings as he was for his business enterprises. In person, Tullman has a certain aging-rocker presence, soft-spoken with longish hair and a casual wardrobe. But when he speaks, he’s all business. What follows is a transcript of our conversation, edited for length and clarity.
The first thing on your Wikipedia page is “serial entrepreneur.” When did you realize that was what you were?
When I determined that when you’re a lawyer, a litigator, it’s a no-win proposition. The defendant hates their life from day one, because they’ve been sued by somebody, so they’re just paying bills. And the plaintiff usually has some enthusiasm early on, and then also gets sick of paying the bills. And so if you’re the lawyer on either side, you’re constantly dealing with a client who says, “Why do I have to pay that?” Or, “Why is it costing me?” It got frustrating to feel that nobody wanted to pay you to do the kind of job that you would be proud of. To do the right research, the right preparation.
And what I always say about this is, as a lawyer, I was just dealing with money. What I can’t understand is how any doctor keeps from killing themselves, when some clerk in Omaha says to some doctor, “I’m not paying for these three diagnostic tests. Wing it.” It’s like, “What? Somebody’s life is on the line here, and some asshole clerk in the middle of nowhere is saying, ‘Well, we don’t cover that.'” I just didn’t want to be in a place where I didn’t think that I could do the absolute best job that I could do. If it was time that I was willing to spend, and if it was effort, it was energy, it was lack of sleep, whatever it was—that’s my ethic.
The serial nature of it has been that they’ve all been technology-based, and the technologies have pulled me forward. Look, we’re in the seventh iteration now of this technology thing. The mainframe was one, the PC was two, the web was three, the [mobile] phone was four, social was five, AR [augmented reality] is six, and seven is really going to be blockchain.
That will be the singly most revolutionary thing; that every kind of transaction that we used to understand was paper and pencil will now be digital. And just to give you an idea, JPMorgan Chase just eliminated 350,000 hours of legal review of standard contracts, because now, you don’t need it anymore. It’s a contract that’s locked. There’s no way—nobody is going to fiddle around with it. You don’t have to have some lawyer at 900 bucks an hour poring over it to make sure the typist didn’t screw something up.
That’s just the beginning. These are hundreds if not thousands of jobs, in all kinds of industries. Consider the oil-rig business—the price of oil went way down, 400,000 people lost their jobs. A lot of the rigs were put on mothballs. The rigs have come back now. The jobs haven’t come back. There’s only about 200,000 jobs. Because in the meantime, the technology became so advanced that five guys control a rig now instead of twenty-five guys.
So the serial thing was just that the technologies represented ways that I could envision new kinds of solutions. And each time they came along, and each time I reached a certain point in my career, I’ve been lucky enough to construct or think of or design new kinds of systems. And what’s so funny is, to me it has been entirely consistent. Other people look around and say, “Well, how did you go from being a lawyer to making movies?” And I’m like, “Well, you don’t understand. I was using a database to make these movies.”
Let’s talk about the loss of jobs that comes from the efficiency effect of technology and innovation. What happens to what was once considered the middle class?
My answer is really sort of a dual answer that has to do with both ends of the spectrum. I’m not concerned about the kids. We’re the immigrants. The kids are digital natives. They get this stuff. You see a five-year-old or six-year-old swiping, and you know they’re going to be OK.
What I’m concerned about are, first, people fifty and up—if we don’t upskill them, they’re fucked. And, they’re not going to do us the courtesy of dying when they’re sixty. They’re going to be around a long time.
And to the issue of the middle class, what I’ve done at Kendall, what I did at Flashpoint, what I’m trying to do with the kids at Dyett [Dyett High School for the Arts, where he teaches], is all of a piece, and the piece is we’d better figure out how to remove the stigma from high-end vocational training. Because those are the jobs that aren’t going to be exported. Those are the jobs that are going to be a path to a realistic middle-class income for people that can be trained to do that.
And we can’t look down on them, because frankly, the joke I always tell is my plumber said he was charging me 120 bucks an hour, and I said, “The doctor doesn’t charge me that.” And he said, “When I was a doctor, I didn’t charge that either.”
The truth is that the trades are one path for reasonable employment. The other truth is that—to give you some idea of the statistics, in 1990, the big three automakers employed 1.2 million employees to generate about $250 billion of revenue. Today, the analogue is the top three tech companies. Same number, probably more. Probably $300 billion. 135,000 employees. Ten to one. We have to figure out a solution for those people.
In the hospitality business, if you look at Marriott and Hilton and Airbnb from a market-cap standpoint, Hilton is about $20 billion, Marriott is about $40 billion. Marriott has 220,000 employees. Hilton has 160,000 employees. So 400,000 employees. Airbnb has 3,600 employees, and a $31 billion market cap.
Why? Because they invented something. They invented this economy. They invented this connection. They invented and have relied on “the trust economy.” In what world would we have believed that we were going to let complete strangers live in a bedroom in our house, or get into a car with complete strangers, or send our kids to school in a car that we didn’t have any clue who the person was showing up or driving?
Big changes. And I don’t really know the answer. I don’t think anybody knows the answer. I think another tsunami that is coming, that we’re not remotely equipped for, is what are we going to do with the general aging population in this country? They’re not going to go—there are not enough senior citizen homes, even if that was the way to do it. So, you’re going to have to have a world of aging-in-place, which means even if mom and dad would like to get out of the house, it’s actually much better living than living in some shithole senior housing thing.
But we have to figure out how to provide care for them, and how to provide support for them, and feed them, and all these kinds of things. But every one of those things represents astonishing opportunities. I’ll just tell you that I’ve been working like the last month or so on—distributed across the City of Chicago there are convents, which are empty. And they’re well-maintained on the outside, because the church is a pretty good maintainer. Inside, they used to be these little nun things.
What I pitched to the archdiocese is, “Let’s turn them into senior living. And we’ll have a common kitchen, and a common education space or something, and we’ll take every two nuns’ little things and turn them into a little apartment.” All they need frankly—they don’t need a kitchen, because they’ll cook centrally—they need a toilet and a place to sleep.
The astonishing thing is that the population to fill those places exists right there in the community. The priest is the best salesman you’ve got. He’s like, “Your husband died? I’ll put you in here. We’ve got a common car. We’ve got a garden. It’s a beautiful thing. It’s right next to the church. You remain part of the community.” And how much better is that than shipping them off to someplace in Barrington and saying, “Go live here with a bunch of strangers”?
And that real estate is sitting there rotting. They store the crèche and the Christmas decorations in there, and that’s about all that’s going on. I honestly think keeping the senior citizens connected to the community is healthier, and it’s more additive.
Tell me about Dyett High School.
I’m teaching a class for ninth-grade entrepreneurs at the Dyett school on 52nd Street. Honestly, if we don’t fix the education and make school exciting or at least interesting again, I don’t know what else we think is going to come out of this, but nothing good is going to come out of it. So I’d like to see those programs expand.
I think half of what kids are learning, if it’s just half, is outside of school now. We have to figure out ways to provide those resources to the whole community, not simply to the kids who are at a magnet school or a place like that.
It was one of the schools that was going to be closed. And the parents had a hunger strike, and the city caved, and re-envisioned it, brought in a new principal, turned it into an arts school, Dyett High School for the Arts. The first year was only 150 students in this facility that used to have 1,000 students. Huge physical plant. They spent about $15 million to refurbish it, some of it, and it’s a beautiful facility.
This year, we have the freshmen who are now sophomores, and then we added 220 new freshmen, so it’s growing, and the interest is substantial, and the parents are engaged. And also we’re developing some community programs as well, to use other parts of the building as a hub for community activities and things.
Is that regular CPS or is that charter?
It’s a regular CPS school, and it’s one of the new community initiatives. We just did a program with Vic Mensa; we’re building a recording studio. But the focus will be less on hip-hop and playing music and more on writing and some of the entrepreneurial aspects of the arts, but with a focus on music for those guys. It’s Vic Mensa and it’s Rhymefest, and a whole bunch of Chicago folks.
Years ago, right after I did Kendall College, I did a project called Experiencia, where we were teaching fourth, fifth and sixth graders to be entrepreneurs and scientists. And we built a city, and they came, and they ran the city. We did about 50,000 kids, and then we sold it to the Girl Scouts. That experience informed both 1871 and also Tribeca Flashpoint, and also frankly what we’re doing at Dyett.
Do you get a pretty broad socioeconomic and racial mix, or…?
No. It’s all free lunch, free breakfast kind of thing.
What has the response been by that student body to what you teach them?
First of all, it changes their perspective. They lean into things now. They’re not like, “I’m going to be a policeman, a fireman, a drug dealer, or a nurse.” They actually think that they can be an entrepreneur. They understand a little bit more about what that means and that gives them some agency and some understanding of other opportunities. And we bring them down here [to 1871], and they see what’s going on down here.
We’ve seen literally the first cohort—we have improved attendance, and we have improved GPA. And if we repeat that this year, that will be proof positive that you can influence these kids in a positive way. We built a special classroom, and it’s got all kinds of special technology and stuff, and the whole rest of the school doesn’t. I had to sort of make my peace with the rest of the teachers. But one of the things I told them was that it was as important—these are life skills, and I really thought the kids would show up better, and they would get a sense that these kids were more on purpose and more focused, coming out of this class, in the rest of the classes. And that has been borne out.