Stephen Cloobeck: California’s Next Governor?

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1:33Hello, I'm Anthony Scaramucci, and this is Open Book, where I talk to some of the brightest minds about everything surrounding the written word. That's everything. That's from authors and historians to figures in entertainment, political activists, and of course, Wall Street. Before we dive in, make sure to follow or subscribe wherever you get your podcasts. And don't forget to leave a review. Good or bad, I want to hear from you. I want to hear whether you're enjoying it or where we can improve. And I can take the hits. So let me know. If you don't like something, say it straight. Now let's get into it.

2:16Welcome to Open Book. I am your host, Anthony Scaramucci. I am joined by, I don't know, he's going to be the future governor of California. He's an activist, a philanthropist, a businessman, incredibly successful businessman, Stephen Klobick, but he's also a bestselling author. The book is phenomenal. It's called Facing Hard Truths, How Americans Can Get Real, Pulled Together, and Turn Our Country Around. By the way, I don't know. I wish I had written this book, Stephen. It's so good, and it's so relevant to what's going on right now. I want to congratulate you on the book, congratulate you on your candidacy.

2:54But I'm talking to a busboy who became an entrepreneur who is now running for office. What a phenomenal American dream and American success story. So let's start there. Tell us a little bit about your background. Hey, everyone. It's Anthony Scaramucci here with some straight talk. Let me tell you, we've got 85 % of our viewers who haven't hit the subscribe button yet. What's up with that? It hurts. Listen, I've made my career by going all in. Right now, only 15 % of our viewers are part of our subscribed family. So please take action. This helps us book more amazing guests. Hit subscribe, join our community, and let's turn these numbers upside down.

3:33Now back to the show. Well, you know, it is an aspirational story. You know, I grew up in, born in Chicago. Matter of with Ari Emanuel and I went to pre-K together in Chicago. We both ended up moving to LA and kindergarten through first year of college. Mommy and daddy wanted a doctor and a lawyer. I was going to be the doctor. Studied science, have a degree in neurobiopsychology, and I thought I was going to be a heart surgeon until the last year of Brandeis University. And I said, I can't do this anymore. 16 more years. So I came back to Los Angeles and went to Cal State Northridge, learned accounting 101 and 102 and started leveraging on my relationships.

4:22And fortunately, I met Mike Milken when I was 13. I also met Harry Reid when I was 15. Harry was my father's attorney. I met Mike at Stephen S. Weiss Temple, and I went to go work in the real estate development business, learning shopping center development management, learned the tricks of the trade, and was promised a bonus a second year and wasn't paid it, so I left. I started my own company. At 24, I built my first shopping center in Burbank, California. Victory Magnolia did the same thing the company I was working for was doing, borrowed the money. And fortunately, during the S &L days, they were able to give you money based on credit of the assets you had.

5:04And I was able to borrow$400 ,000 more than the entire land and building cost. And proceeded to do that throughout Southern California. Second and third shopping centers were in Bakersfield, California. And then Hanford, California, Hemet, Buena Park, Mission Viejo. and moved down to Orange County. I was living in Newport Beach. I had offices in Newport Beach and Mission Viejo. And then I hit the wall on one. Lake Forest, late 80s. Lost all my tenants. My contractor went broke. My subs went broke and I had to build it myself. Ended up giving it back to the S &L. But didn't go bankrupt. And the good news is I learned how to build and my father needed more inventory to continue his company, his timeshare company.

5:56So we went from the Jockey Club in Las Vegas and found a piece of property, and I built Polo Towers at 29. Lived within budget. My father showed up at the groundbreaking and the grand opening, and I was able to do it very successfully. And my father decided to sell his company to Starwood Capital, Barry Sternlich, our friend. And I lasted a year and a half of that company as a co-CEO because the fellow I was working with didn't understand the business. So we ended up doing a baseball buy-sell. That's when you don't have a contractual right either side to buy each other out. And we just had to work it out.

6:33And I remember sitting with Madison Gross and Barry and Rick Kleeman at the time. And I ended up buying the company from my father's company that he sold and was able to create the legacy of what I then eventually built. Had real good success, but then I was hit with a bankruptcy of my father, and he ran on tough times. I never told anyone about that until he passed. He went bankrupt, and it was about$20 million, and I bought that bankruptcy. So I started really with negative$20 million. bucks and was wildly successful at Polo Towers in Las Vegas. And then it did a deal with Marriott next door.

7:21And I realized at that time, after meeting 80 people at Marriott and building that project, Marriott's Grand Chateau, entrepreneurs and big corporate business do not, it cannot exist. So they ended up buying me out, sat on the sidelines for a year and saw a great opportunity by some of my great hedge fund buddies, Corsair, Brian Gonnick, shows me a deck of a company he's got invested in. He says, Klubi, I can't figure this out. Can you look at this? And I said, Brian, how much do you got to have in this deal? They had a sizable position. And I said, this is all you got? He goes, well, I'd get you a can of Q.

8:06And I'm like, what's that? I had no idea what a K and a Q was. I was a private guy. And so I got a couple of the K and a Q and they still couldn't decipher what the company was about. And I said, Brian, you got any more information? And he showed me a roadshow document. And I looked at it and I said, oh my God. And kept my mouth shut and started buying stock in the company. and then I said maybe I could buy this company and at that time there were activists in the business and Magnetar and Dan Loeb over at Third Point and Dune Capital, our friend Steve Mnuchin I cold called them and I said hey guys, you guys are not happy with this company what if I buy it?

9:00and they go, you and what? well, me and an attorney and I'll get a finance guy. And I found a finance guy and I underwrote the transaction. And I said, wow, there's a lot of diamonds in the rough, if you will, in this company. So I ended up tendering for the company, but not even knowing how to do that. I had to call my dear friend, Jim Murr at MGM. I said, Jim, what do I do? He says, do you have a banker? I'm like, what do you mean? Well, let me give you some names of bankers. And I had a few to choose from. And I ended up choosing James Stewart at UBS. And I ended up tendering for the company.

9:47And everyone that was in that credit did phenomenally well. I think Dan Loeb told me that I bought the company at 16 bucks a share. And his basis was like three and a half bucks. Not a bad trade, Dan. But they were on the verge of bankruptcy again. This was a broken company for 20 years. And everyone bet against me buying it. It had M1, M2 issues. Its financial statements were revoked by the SEC. It had money laundering issues, Patriot Act issues, team issues, and more importantly, customer issues. So I had to fix the unthinkable. And we were able to do that, get the deal financed, April of 2007, July 2007, what happened?

10:34The markets closed. Then we were hit with November of 08. Everything was closed. And I had Soros as my partner at the time. And that was the day that George Soros went on air and started saying, we're betting against the consumer. I called my dear friend, Len Potter. and I said, Len, you guys can't be my partner anymore. Your big boss is betting against the customer. That's what we do. So what if I make you this deal? Give me 90 days to buy you out at par and I had a big pref on me and I'd give you 6%. So you get your money back plus 6%. That's not bad. You're betting against the consumer so you think we're worthless.

11:22And you know what? The good news is I had a relationship with Mike Milken and Guggenheim. Took Soros out and then bought every other mid-market company at about one and a half, two times EBITDA before synergy savings. Created the greatest, largest hotel timeshare company in the world. With hotels in over 35 countries, 16 languages, 6 currencies. And we handled the balance sheet income statement and fixed that broken company, the unfixable. And at the same time, solved the consumer issues by doing polling into the customer and to determine what the customer wanted. And all we did was live to my dad's original thesis, give the customer more than they bargained for, just give them a little bit more than they bargained for.

12:18and I delivered the meaning of yes. I was able to put my business card at every front desk with my live email, live cell. Nobody had ever attempted that. And a card underneath each bed that says, yes, we cling here too. And created a culture of warmth and compassion. One in which we delivered the meaning of yes, both internally with our team and externally to each and every guest. and we lived in integrity. We lived in collaboration. We delivered in great guest service, equal or greater value. Now, these principles, I tell you, are the ethos of how I live. And what I didn't tell you is during this period of time, prior to Santerra, I had an architect by the name of Joel Bergman in Las Vegas.

13:14And he said to me, hey, have you ever met this guy, Donald Trump? Nah, Steve Wynn's talked to me about him and Milken casually mentioned him. But Milken later in life told me, Stephen, you know, the difference between Donald Trump and you is Mike. No, Mike, tell me since you gave me my business degree, Mike, that's where I went to business school. he said well i financed you and i never financed him there you go so i'm sitting in trump tower years and years ago across from him rona i think her name was rona waiting waiting to go in the office a couple of times and every time i alienate he ended up alienating rona too as he does with everybody but okay yeah so i remember leaving and coming back to Vegas after the second meeting and Joel Bergman said, we're going to do the deal with him.

14:14The Trump Tower in Vegas, the fractional timeshare part. I said, Joel, I can't. Got a bad feeling. This guy doesn't pay his contractors. I pay my guys within 24 or 48 hours. I got integrity. I don't think this guy does because he was trained by Roy Cohn. I had watched that James Wood documentary on Max way back when on how this guy was trained. Lie, deny, lie, deny. That's this gentleman's ethos. And I have values and he doesn't. I'm a gentleman. I serve. He likes to be served. It is just the antithesis. And as life went on, as I created Diamond Resorts, I thought back on this when I was doing Undercover Boss and I'd done it the second time.

15:05And I said, you know, these shows, The Apprentice and Undercover Boss are similar. Act one, two, three, four, and a reveal. And both shows at the end, people cry. But at the end of my show, they're happy. And I don't say anything other than when I'm displeased. I just say, you know, go see HR. I don't do this. You're fired. This drama, this bullshit, this hullabaloo. I'm built to serve, and I always have. And it goes back to originally when I wanted to be a doctor. I wanted to serve, take care of people. I like service. I'm a busboy at heart. I like cooking and serving. This episode is brought to you by State Farm.

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16:10The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small. From improving emergency response times to protecting against cyber attacks, local, state, and federal governments are innovating with Google AI. This is a new era of American innovation. Find out more at g.co slash American Innovation. Stephen, the book was awesome. Give me the pitch. We have a, you know, my advertiser, I promise I'm a short podcast because we have great listeners. Go. And so I need a five-minute pitch on Stephen Klobeck for Governor. Yeah. I think the book you write is incredibly insightful.

16:52I want every one of my viewers and listeners to go out and buy your book because I think your book, You called it the center. It's sort of like, to me, it's the radical center because you're providing common sense solutions. I get done with your book. I'm like, this isn't really about left or right. This is about right or wrong. There's great clarity in your book. So give me in the minutes that we have remaining. What's it? I'm sorry. Go ahead, Anthony. So it's the hard center with bravado because the center has always been here. We've been listening to the loud, noisy, hard right and hard left.

17:32And no one, as I decided to do this, I interviewed every single candidate as I moved back to California. Yeah, I actually left a 0 % tax date to come pay tax. It was my dream. This is where I grew up. And I came back here and I interviewed every single candidate. I built my dream home and I said, after I interviewed every candidate, this is the best we got. Maybe I should look at this. And I called Frank Lundson. I said, what do you think? You're crazy, Klubeck, but you've been good crazy. So go ahead and study the income statement and balance sheet. And I started to meet over 300 people. And I saw there were solutions.

18:07No different than fixing a broken company. And I ran tourism in the United States. I created Brand USA. I ran basically Nevada. And I've done local politics. have I run an election? Yeah. When I had to tender for Santerra, I ran an election. I didn't need 50 plus 1%. I needed over 90%. So I do the difficult. I changed the name of an airport. So I did a survey of those in California, Anthony, and I wanted to listen to them no different than finding out how to solve the problems of the customer and hotel business. What were the issues of California? It's not open for business. It's not affordable, livable, or workable.

18:45There was no respect no responsibility, no results of leadership. The Democrats had failed to execute. They're not accountable for dollars and they don't enforce the law. Well, I believe in the law. We don't steal. It's 950 bucks and zero. Eighth commandment. Okay. It's not Elon Musk's style. It's more of a Clinton-esque style. Reinventing government. But the way I see it, its performance and results, the California Department of Performance and Results, also known as CPR, which the state needs. Yeah. Do I talk in buzzwords? Because these come from the people. Every single person in California is a customer and they need to receive equal or greater value.

19:32And that is it. And there has got to be bravado and somebody to protect this fourth largest country of the world? Yeah, it's the fourth largest economy. And it's one of the great innovators of global history, frankly. And you had a great success. Most people that get to California that have your ambition have great success. It's the bedrock of the American dream. We went through your book and I took five words out of your book. And I'm going to say the word, uh steven and then i want you to manifest in your mind a sentence about the word okay ready okay uh the first word is truth integrity is everything yeah don't bust the trust and you bust the trust with me you're done it was so brilliant i would say integrity equals opportunity that was what big lesson in your book for me.

20:31Okay. I want to say the word America. Aspiration. Okay. Opportunity. How about Americans? Americans as you write about them. Customers. Okay. California. The dream. What about the word Klobek? Klobek? It was actually Klobek. K-L-O-B-O-K. it's a gentleman that came over in the 1900s with very few pennies my grandfather from russia and if he would not believe what his grandson has done and that's the american i just think listen i i uh i don't know i think you're going to be the governor okay and i i want to be helpful to you i think that this book everybody should go out go out and read it the title of the book is facing hard truths, how America can get real, pull together and turn our country around.

21:30And I will say something about you that I see California in you. I see what California represents to our society and a lot of our trends start in California. And so when I talk about aspiration, I see you not only going on to fix California, but being a good template, if you will a good litmus test for the rest of the country. So I'm rooting for you, Mr. Klobeck. I want to see you be the governor. And I'm proud to know you. And I want people to go out and buy your book. And I appreciate you coming on our show today. I admire you and everything, the hard work you've done. And we've watched each other grow in business.

22:10And bravo to you and for your righteousness and for your unwavering commitment to be you and stand up for what is right. Well, sweet of you. And we both share one thing. After reading your book, I was like, man, this guy really loves the country. But there's something else about you, Stephen. You really love people. It comes out, you reek of a person that really wants to lift other people up, lower the ladder for other people, and help them get up the ladder. And so I have one thing that was a lot from your book, by the way, sir. I got a lot of respect. I knew you and had a lot of respect and admiration for you.

22:51But your your book took it to a deeper dimension for me. Two things. One, I'm a guy who sits in the back of the theater. We'll take all the incoming bullets and watch my team get their trophy. Two. If I'm successful as governor of California, which I know I will be. my greatest goal is not the fixing the balance sheet and income statement is to create true great leaders that will far surpass my time to make sure California is always the forefront and the bully pulpit of the United States. Amen. All right, we're going to leave it there. So thank you so much for joining. I am Anthony Scaramucci and that was Open Book.

23:37Thank you so much for listening. If you like what you hear, tell your friends and make sure you hit follow or subscribe wherever you listen to your podcast. While you're there, please leave us a rating or review. If you want to connect with me or chat more about the discussions, it's at Scaramucci on X or Instagram. I'd love to hear from you. I'll see you back here next week.

24:07Thank you.