Business Lessons from Snoop Dogg

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Snoop Dogg was born and raised in Long Beach California. His famous nickname was created by his mother because she thought he looked like Snoopy from the Peanuts cartoon strip. His music career started in 1990 when he recorded cassette tapes with his friend Warren G, who gave them to his brother Dr. Dre. After performing on parts of an album for Dre, Snoop recorded an album for Death Row Records entitled Doggystyle and the rest is history.

Why write about Snoop? Because he is a great example of a mostly self-taught business person who has achieved significant success. Like Sammy Hagar, who I wrote about recently, Snoop learned about business by doing things himself and watching others. One of the net worth rankings compiled by professional guessers estimates Snoop has net worth of $135 million. That guess seems plausible given his many licensing and endorsement deals, investments and profits from his musical career. But a guess is just a guess.

“I was on Death Row Records. Suge Knight had all the money. He gave us a little bit. When Master P came out, everybody on No Limit had money.”

The back story for this quote has been described by Snoop in this way: “Master P had to go visit Suge Knight in the penitentiary. [They] struck a deal because everybody else was scared of [him]because that’s when Suge Knight was the monster, the boogieman. He went to go see him, struck a deal, paid him, got my publishing rights and gave me three albums.” There is a lot to unpack in what Snoop said in the three previous sentences particularly, if you do not follow Snoop’s genre of music. What Snoop is describing illustrates not only the nature of value chains in business but also several important points about negotiating styles. Snoop is talking about Suge Knight who founded Death Row Records and was in the penitentiary at the time he met with Master P. The Village Voice describes why Suge was in prison: “He was behind bars, jailed for a parole violation in connection with a Las Vegas casino beatdown the night Tupac was fatally shot.” The business problem existed because Snoop had signed an exclusive six album recording contract with Death Row but was not happy with his compensation or how he was being treated.

Master P is the founder of No Limit Records, who once described the situation that surrounded his meeting with Suge about Snoop’s recording contract by saying: “I feel like I saved Snoop’s life. I was always a fan of him, but when I talked to him, he wasn’t in a good place. Suge was about to sign him over to some other label. I’m like, ‘Man, my money don’t spend?’ Let me get that.”

When Master P moved to Los Angeles Suge did not want another rival on his turf. Master P describes their conversation: “When I first got to LA I got a call from Suge. Probably everybody gets that call. I’m like, ‘Dog, you do better talking to me in person.’ He’s like, ‘Man, LA isn’t big enough for all of us.’ Puffy was out a bunch a people. I was like, ‘Man, I just bought a house. I ain’t going nowhere. When you moving?’”

As context, in terms of gang affiliations, Snoop = Crip and Suge Knight and Tupac = Bloods. This history made their lives complex at times. Snoop no doubt knows about “Worldly Wisdom” since Charlie Munger is a long standing member of the well-known Pasadena “Peanut Brittle” Gang. While Pasadena Peanut Brittlers are not officially affiliated with Crips or Bloods, they do have a fearsome reputation and have negotiated a truce with most other gangs. I will quote Munger often in this post to avoid any retribution from Peanut Brittle Gang members.

Every business has a value chain which is the complete range of activities that different businesses or individuals go through to bring a product or service to their customers. Everything required to bring a product or service from conception to delivery to the end consumer must be considered in creating a value chain analysis. Everyone in a value chain is trying to get as big a slice of the pie as possible unless they are trying to keep someone else alive so the entire chain does not collapse. What share any one participant in a value chain gets depends on the supply and demand for what they provide which determines their negotiating leverage. The prices paid at wholesale and retail are determined by what Roger Fisher calls a “Best Alternative to a Negotiated Agreement” (BATNA) in his famous book on negotiation entitled Getting to Yes. In short, it is your alternatives that matter. Without some alternative to what you seek in the negotiation the other negotiator has very strong leverage to get what they want. In a negotiation it is your alternative that matter most.

The price paid by any participant in a value chain who is not the end customer is the “wholesale transfer price” which I often write about. What Suge or Master P paid Snoop is one example of a wholesale transfer price. When Snoop started out in the music business he had a terrible BATNA so Suge signed him to a long term contract. Once Snoop had a hit record he potentially had a strong BATNA, but for the existence of that exclusive contract. Suge knew Snoop might be in that situation which is why it was a six record exclusive deal. This story is just one example of the constant battle between “the talent” and the businesses that build a business around that talent over the wholesale transfer price.

“I knew the job was dangerous when I took it.”

I first heard this phrase many years ago on a cartoon called “Super Chicken,” which was a companion to the animated television series “George of the Jungle.” I would be willing to bet that Snoop first heard it there too. The phrase is also a line Snoop’s uses on: “Neva Gonna Give It Up.” Snoop also once used the phrase in an interview with The Guardian in talking about his affiliation with the Rollin 20s Crips. The Warren Buffett test as always is the right way to do the math, even for a person deciding whether to be gang member: “Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect, but that’s what it’s all about.”

“The rap industry takes a long time to make money. The movie industry takes a long time to make money. The tech industry takes 3-4 years to make money, and that’s just what it is. If you’ve got something that’s ahead of the curve. That’s why I feel the tech game is the number one industry right now.”

Snoop likes that tech industry investments and careers can be highly convex (huge potential upside and a low relative downside). Snoop knows that change in a technology-based value chain can happen fast both in terms of upside and the downside since there are feedback loops that operate in these businesses. In other words, the power of technology cuts both ways.

As for the music business Snoop has been successful for a very long time. He has said about that experience:

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“I’ll continue to diversify, not just invest.”

Diversification can be a sound approach to investing and life. Or not. It depends. On the positive side, diversification can help us deal with certain human traits that get us into trouble. David Swensen believes: “Overconfidence contributes to a litany of investor errors, including inadequate diversification, overzealous security selection, and counterproductive market timing.” But as Howard Marks notes it can also be a problem:

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Charlie Munger believes: “The Berkshire-style investors tend to be less diversified than other people. The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results. But why would you get on the bandwagon like that if somebody didn’t make you with a whip and a gun? Seth Klarman points out that it is better to know a lot about 10-15 companies that to know just a little about many stocks. When it comes to diversification vs. concentration Charlie feels like the Maytag repair man: “I always like it when someone attractive to me agrees with me, so I have fond memories of Phil Fisher. The idea that it was hard to find good investments, so concentrate in a few, seems to me to be an obviously good idea. But 98% of the investment world doesn’t think this way.”

The number of public company businesses a person can realistically understand and keep up to date on is significantly less than 20. The idea that someone like a dentist working full time in his or her profession is going to pick technology stocks and do better than they would just buying a low cost index fund is improbable. This is why more than 90% of the investing world should buy a diversified portfolio of low cost index funds. But that won’t happen give human nature. Munger says: “Most people who try [investing] don’t do well at it. But the trouble is that if even 90% are no good, everyone looks around and says, ‘I’m the 10%.’”

“I’ve been a part of a lot of businesses that have failed. And I believe that failure creates the best business in the world because it trains you and it gets you prepared for failure, and it teaches you how to better prepare yourself for the next time. And the businesses that I failed at, they don’t, you know, make me feel bad, they just make me want to go back to the drawing board and try again and come up with something’ that’s different and more creative.”

I have written about mistakes and about the power of “not being stupid” before and you can find the links to that writing in the end notes to this post. By paying attention to your mistakes, you can learn from your errors and improve your methodology argues Munger: “You can learn to make fewer mistakes than other people- and how to fix your mistakes faster when you do make them.” Rubbing your nose in mistakes is a very valuable habit to get into. Don’t dwell on mistakes, but do perform a post mortem. Snoop knows he has made mistakes but without those mistakes he would not ave had any successes and would not have become smarter about business.

“If you stop at general math, you’re only going to make general math money.”

No one sets out the right objective and the necessary math skill set better than Munger: “Everything I’ve ever done in business could be done with the simplest algebra and geometry. I never used calculus for any practical work in my whole damn life.” Munger elaborates on the level of math needed:

“Obviously, you’ve got to be able to handle numbers and quantities—basic arithmetic. And the great useful model, after compound interest, is the elementary math of permutations and combinations. It’s very simple algebra. At Harvard Business School, the great quantitative thing that bonds the first-year class together is what they call decision tree theory. All they do is take high school algebra and apply it to real life problems. And the students love it. They’re amazed to find that high school algebra works in life So you have to learn in a very usable way this very elementary math and use it routinely in life—just the way if you want to become a golfer, you can’t use the natural swing that broad evolution gave you. You have to learn—to have a certain grip and swing in a different way to realize your full potential as a golfer. If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one legged man in an ass kicking contest. You’re giving a huge advantage to everybody else.”

“I used to be focused on being the dopest rapper in the game, and then once that became what I was, I wanted something different, and I wanted to become the best businessman in the game. I wanted to learn how to master the business like I mastered the rap.”

The best business people never stop learning. It is that simple. While Snoop has said: “When I’m not longer rapping, I want to open up an ice cream parlor and call myself Scoop Dogg,” I doubt he was being serious. He seems destined to be a video and music performer and mogul for a very long time.

As another aside, Snoop has an interesting view when it comes to estate planning. Snoop told Business Insider.

“I don’t give a f— when I’m dead. What am I gonna give a f— about? This goin’ on while I’m gone, you know?” Snoop hopes to be reincarnated, and observe the ruckus over his estate from the next life.”Hopefully, I’m a butterfly,” Snoop said. “I come back and fly around and look at all these motherf—–s fighting over my money and shit, like, ‘Look at all these dumb motherf—–s.’ Ha!”

“The most important decision I’ve made in business? The choices of people I have around me.”

The more time you spend hiring the right people the more you can delegate to those people. This approach to business requires that you spend more time and effort in the hiring process but it will pay big dividends. “Come and see the Dogg in a hood near you-in. You don’t ask why I roll wit a crew, and twist up my fingers and wear dark blue-in. On the eastside, that’s the crew I choose.”

“Sometimes if you’re lucky, someone comes into your life who’ll take up a place in your heart that no one else can fill, someone who’s tighter than a twin, more with you than your own shadow, who gets deeper under your skin than your own blood and bones.”

Having the right mentor can be an invaluable thing. People too often think that only older or more experienced people can be a mentor. The better view is that anyone can be your mentor. You can see that in this interchange:

“In the midst of chopping oranges, Martha Stewart finds that her knife is dull, which is unacceptable. She implores the audience, “Please make sure you have sharp knives when you’re cooking in the kitchen,” and when Snoop tries to tease her for fixating on the knives, she says: “You have never been to penitentiary. “I have and they don’t have sharp knives. You can’t even get a spoon.”

“If it’s flipping hamburgers at McDonald’s, be the best hamburger flipper in the world. Whatever it is you do you have to master your craft.”

Occasionally on weekends I go for walk in Seattle on Capitol Hill and visit the grave of Bruce Lee. He famously said: “I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.” I think of this Bruce Lee quotation whenever I visit a hawker center in Singapore and I see something like a fellow who has been making just Chicken Rice there for several decades. When you specialize like that you make some really special Chicken Rice. Snoop is making a similar point above when he says master your craft.

“Always had the show, but I never had the business. And once I got the business, now I’m the king of show business.”

I wrote a post about musicians and the need for them to know more about business which can be found in the notes below. The lead quote in that post from Kurt Cobain is the best: “I wish there had been a music business 101 course I could have taken.” This is tragic and part of the reason why I write this blog. Stories like the one I wrote about Sammy Hagar who learned about business on his own should be inspiring for young musicians though. It can be done. A number of really great business people started out doing things like washing dishes or driving a delivery truck and are 100% self-taught in business. For example, Snoop has found an approach to brand management that works well for him. A Forbes article describes Snoop’s branding strategy:

“A lot of brands, you can’t touch them,” the rapper says. “When you’re dealing with Snoop Dogg, he brings you closer to the brand and it feels like it’s a part of you.” Snoop’s certainly trying to touch consumers in ways few rappers do. Among his products: For $12.95, TomTom GPS Navigator users can download Snoop’s voice to give them directions; for $79.95, audiophiles can wear Snoop Skullcrushers headphones in black or blue paisley; and for $19.99, you can sport a Neff Snoop Micro Dogg Tee.

More recently Snoop has partnered with Jack in the Box to sell a Merry Munch Meal.

[When asked how many joints he smokes a day] “Today is a bad day. That means I’m going low. Because I keep getting asked questions so I got to make sure I’m on point. On a bad day 5-10. On a good day 25-30.”

In a few other interviews and an AMA Snoop has said he smokes as many as 80 joints a day rather that the 30 mentioned in the quote above. regardless of whether it is 30 or 80 joints a day, that is a lot of weed, especially since is is almost certainly of the highest quality. There is no business lesson to be taken from this really. But it is an amazing statistic, so there’s that. With this information and a great golf swing you will not achieve total consciousness though. However, it is clear that Snoop has been able to capitalize on his love of weed from a business standpoint. Snoop’s pitch is:

“As a long-time connoisseur and cannabis expert, I knew it was time to give my people what they wanted — something they can trust. Enjoying Leafs is like smoking with me — the D-O-double G — and I’m proud to finally share what that experience is. All the flowers and extracts from Leafs were hand-picked by yours truly.”

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