Eric Wright was born to Richard and Kathie Wright on September 7, 1964, in Compton, California, a middle-class Los Angeles suburb that was experiencing blockbusting. His father was a postal worker and his mother was a grade-school administrator. His family and others witnessed the rapid shift downward of their community, caused by several factors including white flight, the nearby Watts Riots, and the formation and expansion of street gangs, most notably, the Crips and Bloods. Wright attended Compton High School but dropped out in the tenth grade. He later received a general equivalency diploma (GED).

Wright supported himself mainly by selling drugs, and introduced his cousin to the illicit occupation. Wright's music manager Jerry Heller recalls seeing Wright selling marijuana, but not cocaine. Heller would claim that Wright's "dope dealer" label was part of his "self-forged armor". Wright was also labeled as a "thug". Heller explains: "The hood where he grew up was a dangerous place. He was a small guy. 'Thug' was a role that was widely understood on the street; it gave you a certain level of protection in the sense that people hesitated to fuck with you. Likewise, 'dope dealer' was a role that accorded you certain privileges and respect." In a 2006 interview with the Associated Press, Heller stated that he had "no proof that he was ever a drug dealer. I'm not sure if he was or wasn't. I know that it was good for the Ruthless image, the Ruthless persona, so maybe that's why he adopted that".

In 1986, at age 22, Wright had allegedly earned as much as US$250,000 from dealing drugs. However, after his cousin was shot and killed, he decided that he could make a better living in the Los Angeles hip hop scene, which was growing rapidly in popularity. He started recording songs during the mid-1980s in his parents' garage, thus starting Ruthless Records.

In 1987, Wright met with Jerry Heller, a music industry veteran who had represented Elton John, Marvin Gaye and others. The original idea for Ruthless Records came when Wright asked Heller to go into business with him. Wright suggested a half-ownership company, but it was later decided that Wright would get eighty percent of the company's net income and Heller would only get twenty percent. According to Heller, he told Wright, "Every dollar comes into Ruthless, I take twenty cents. That's industry standard for a manager of my caliber. I take twenty, you take eighty percent. I am responsible for my expenses and you're responsible for yours. You own the company. I work for you." Along with Heller, Wright invested much of his money into Ruthless Records. Heller claims that he invested the first $250,000 and would eventually put up to $1,000,000 into the company.[