20VC: Alex Rodriguez (AROD) on Investing Lessons from Warren Buffet, How a Meeting with Magic Johnson Changed His Approach to Business and The Single Best and Worst Investment Decisions he has Made and Why AROD Is Not Buying More Real Estate

0:00I think I learned from Warren a few things. He always talks about sticking to your circle of competence. Lung number two, he always talks about, by the best and forget the rest. And then, he always talks about separating emotion from investing. Being a green investor, companies, stocks, they don't care about your emotions. I mean, I am excited for the show's day. It is not every day we welcome one of the greatest athletes of all time to the hot seat. Alice Rodriguez joins us in the show's day. Alice is a 14 times NLB All -Star and is a 2009 World Series Champion with the New York Yankees and in the world of business, Alice is the chairman and CEO of A -Rod Corp and is co -owner of the Minnesota Timberwolves.

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3:32You are now arrived at your destination. Alex, I am so excited for this. I had so much remalorate your partner before the show. Say thank you so much for joining me today. It is my pleasure. Now I always like to dive in at the deep end, Alex. And so we look at your incredible history and career, but I always believe we're a function of our history. What are you running from, Alex? Yeah. I mean, I think for me, probably where my heart and mine goes to is, you know, dad leaving at the age of 10 when I was 10 and leaving my mother in my two siblings behind. And I was a youngest of three. And I thought that was a pretty significant part of my life that kind of, for better or worse, had a huge impact in my life.

4:16How did that shape your mindset? Because that is such a significant moment, very out of it. I didn't really get to unpack it if you fast forward all the way to 2014 When I got suspended from Major League Baseball the longest suspension for PD use It was until then that I had a Re -opportunity to dive into the deep end of the pool turn the lens inward and met a guy a doctor that really saved my life His name is Dr. David Unfortunately, he's no longer with us. He passed within the last 24 months but he really changed my life and helped me unpack a lot of the things that happened due to that exit of my father when I was 10 and then more importantly help me rewire my brain and I worked with him for more than six years extensively.

5:02I think that's that's where my brain goes. How do you think you changed as a result of that time walking with him? Completely changed. I would say Harry that pre and post suspension I'm a completely different person, complete different person and it starts with just appreciation being grateful The definition of winning and success is wholly different today than it was before my suspension before my suspension I thought winning and success was exactly what I said winning a world championship winning a big contract Having nice cars or a nice house dating beautiful women what I understood post suspension.

5:38Post, Dr. David, was that I was completely out of my mind. And none of that is really winning as success. Wow, it sounds nice. And it's fun. Success today is really built more around gratitude, others around me, winning, collaboration, being a present and loving father, completely different. Do you have to practice that? Because I'm with you. It sounds wonderful and gratitude and you know appreciation, but when you kind of in the grind, you're an athlete. I guess I'm not an athlete. I know I look at it, but I'm not, but I'm a grinder. It's not that easy to be like, oh, I really appreciate this and I'm so grateful for this.

6:16It's I want to win. But how do you actually bring it back to that today and ensure that you do remember that? I think it's really about priorities and it's much easier. I would say to say this in my 40s versus 20s and 30s because the thought What that I always share with my team is this whole idea that I see a lot of young people make this mistake with they go wide and shallow and they try to be experts at all things and we always talk about a rock core narrow and deep. And what are the priorities? What are the two or three things that are most important to me personally, to my family, to my company?

6:51And it can be great, in my opinion, at 10 things. But if you work really hard at one or two of them, I think you can be great at it. So it's priorities and really simplifying and slowing down to speed up. Can I ask when you think about kind of where people are really great those one or two things? I look for spikiness in people when I'm hired today, which is those one or two things. What advice would you have for me when you think about assembling great teams as a founder, as a CEO, when you all lessons on finding people's one or two things and bringing them together? I've been very fortunate playing professional sports for over 25 years, that you end up with this experience where you have pattern recognition.

7:32Now, that's not enough. You're able to see really talented people who are hungry and gritty. But my partner, Mark Luria, has taught me a lot about reading resumes. The key is the tens and the fives are easy to recognize. The tens, you know, jump out of the page, and the fives are people you're probably not going to hire. The challenge is when you have the six and the sevens. And at the six and the sevens have the gift of GAB and are good people, they can trick you over a series of two or three interviews. So one thing I would say, higher, slow, fire fast. I would avoid, and even interviewing, as you read through your hundreds or thousands of resumes, I would eliminate hiring six, seven, and eights, and I would focus on just the best of the best.

8:17That way, at least you're at a pool of people that you want to hire, then is just a matter of culture fit for you. You mentioned Mark Ray or partner, and one of the most skilled resume readers I've even ever met. He did mention to me that you're one of the most skilled deal makers that he's ever met, and negotiate it. Can I ask what does great deal making look like in mean to you? You mentioned how your definition of success has changed. What does great deal making mean to you? Well, I think it's empathy and compassion, really connecting with the seller or the buyer. And really understanding, I don't think Harry you can make a good deal with a bad guy.

8:55That's number one. Number two, I do believe in this concept of win -win. If I'm trying to make a deal with you, Harry, and I don't understand that you live in Chelsea and London and you're this great athlete and things are important to you, I need to know what, what are the things that are important to you. and understand one of the three most important things with this transaction that mean the most to you. And I'm gonna start there, but if you have 10 things that are important to you, it's hard to meet all 10, but I can certainly focus on the top three. And I think working from there and then working backwards is really important.

9:26But also being a good listener, I think so many people are busy with, you know, running their mouths. I found that the greatest entrepreneurs and the greatest negotiators are people that are good listeners. and then try to work out a structure. Sometimes the price is not negotiable, but sometimes terms are. Sometimes the price is negotiable, but terms aren't. And if you just go full speed ahead and you don't understand the rules of engagement, I think you're not giving yourself the best shot. I know it varies by situation, but would you say you are a had or a halt person when it comes to decision making?

9:58I think back when I was, if you go back 10, 15, 20 years, definitely hard. I think today I'm a combination of head, heart, and just some common sense. What was the best deal that you did and when you reflect? And what did you learn from doing that? The best deal, or one of the best deals that we've done here at ARACorp is we bought a third of a business called Petrol's Pace almost five years ago. And we bought a third of the company and it was a lending brokerage business that was ESG and green. And it would lend to real estate owners and it was a great substitute to measure in debt. So in a world where in mezzanine debt you pay mid teens you were paying for petriots pays money about five or six percent Of course this was before the fed has raised rates tremendously and so if you're looking at a loan that is Not personally guaranteed it's half the price of mezz debt and it's green and makes the world a better place I really liked it.

10:57I love the two founders We backed them and then this year we sold it to Apollo for almost you know 12 times was to Wastill. I think the worst deal came around the financial crisis in real estate. It was around 08. We acquired a beautiful, beautiful portfolio of about a thousand apartment units. We paid around $60 ,000 per door. It was right around Yankee, George Stimerterfield in Tampa. It was a beautiful portfolio. It was the right assets. It was the wrong timing. And what happened was we woke up about two weeks later with the crash and the assets were worth probably $40 ,000 per door and we owed 42 ,000 per door.

11:40So we were underwater. That was probably the worst. Thankfully for us, we had enough capital to negotiate with the banks and we ended up selling that like five years later for about 75 a door. That's a worrying moment. In those worrying moments, I find it very reassuring to have bluntly mentors who've been there, done it, seen it. You have some of the most exceptional mentors, Mark was telling me. He told me, Magic Johnson, he told me, one, Buffett, John Gray, Barry Stone, late, I wanted to unpack lessons from them. If we go to Magic Johnson, what's he taught you and how have you changed having learnt from him?

12:16I love Magic Johnson and he is a very dear friend. He was my hero and Harry what Magic did for me as he gave me hope. In my neighborhood, you do not have a lot of role models that were suit and tie every day to work. There were a men of color. And then when you go into having a hall of fame, basketball career, and then taking that to a hall of fame career and business, the first thing he gave me was hope. Because I said to myself, boy, if magic can do it, why can't I? So that was very important. The second thing he did for me as we then became very good friends. I had a very important meeting with him that he taught me framework.

12:56And he basically gave me his floor plan on how he took Magic Johnson, the Hall of Fame iconic basketball player, to a Hall of Fame iconic business man. And this was in a course of a three hour dinner that we had in LA, near Rodale Drive, who went to a steakhouse. We had a backroom. Lawn Rose and his longtime partner and agent set this meeting up. And And it was the 30 minute meeting, it lasted around three hours. And years later I asked Maddox, I said, Maddox, I am overwhelmed, I was so nervous to ask you, but I have to ask you now, why did you give me three hours when it was a 30 minute meeting?

13:31And he said, I'll let you the only athlete that I've sat with, that came in with a notebook and had like nine pages of notes. So I felt I had to cancel my other engagement and I wanted to really lean in and try to help you because I thought you were really sincere and present. What was the secret to his framework? Because his clearly worked so well for him and for you, but respectfully it doesn't work for everyone. You are very few people who succeeded in the way that you have in this business in making that transition. What was his framework and what has worked from it? There was three things.

14:03He said number one, you have to find the best people of the world to come work with you. In the story and don't compromise that. They won't expect that from former athletes like us. He said number two, lean into your superpowers. Mine is basketball, yours is baseball. So go out and be the best baseball player you can. And when you have an opportunity, it'll continue to do television work when you're done playing so you can stay connected to the next generation of baseball fans. And thirdly, he said, come out and do these kind of things, Harry's go out and speak to the Goldman Sachs, the J. B. Morgan, the private equity community, and stay connected and stay informed and continue to stay in front of the smartest minds and continue to practice what you preach.

14:45So those three things, I wrote them down in my notes and I tried to execute those over the last 25 years. That must have been such a cool lunch. It was a dinner. It was a dinner. I mean, that's a fun one. Warren Buffett, I mean Warren Buffett is most, he mentioned, kind of, the private. I believe it is most of our hair, as I grew up on Warren and Jaldi's lessons. What have you done from Warren? Paul's Warren's the absolute greatest and I've had an opportunity more than a handful of times to sit down with him and spend Five six hours a day now where he's literally going over all my books looking at all over the real estate and just really giving me feedback I think I learned from Warren a few things He always talks about sticking to your circle of competence That's always been really important.

15:33Look number two. He always talks about you know by the best and forget the rest The saying that he says is, I'm better off buying a great business for a fair price than a fair business for a great price. And that's been true so far in my career. And then I would say this one I will share with you is he always talks about liking sports, separating emotion from investing. And the same is true for sports, baseball, basketball, anything. And what he means by that is being a great investor, companies, stocks, they don't care about your emotions. He always talks about emotion, green investors, usually have their emotions in check.

16:09So those are three things that I'm enjoying sharing with you today. When I went out to your portfolio, which you're team Clanny Santévo before, the one thing that's staggering is the breadth. From the real estate to the kind of venture and P investments to everything in between, there's a lot. How do you think about prioritization and where your spikey self is? Where are you best in business? You said that you're best at the Clity Baseball? But now you're a business leader. Why are you best in business? I think if you take a step back to when I started my business career about 25 years ago early on I wanted to have it like a pyramid where at the very bottom I would try a bunch of things and put some very small bets 50 a hundred thousand dollars and a number of Companies that I wanted to a get a good return but be get a fair understanding of the business of the space of teamwork and that's what exactly has happened over the last five years.

17:03We've really kind of worked this triangle where we're we're only doing things that we're passionate about that we understand really well that we have a competitive advantage and we can bring real, real value to the founders. What that looks like today at a record we do two things. We do sports and we do real estate. Sports I've been doing for my entire life pretty much and real estate. I'll tell you when I was seven years old or so I always thought about real estate because we were life -longer renters. We always rented my mom at two jobs. I always dreamed about trading places with the landlord.

17:40And then sports I was playing baseball. So if you could go, if you now cut 40 years later when I'm 47, I'm doing exactly those two things real estate and sports and are thrilled to be in those I mean, you look incredible for 47 clearly. The facial moisturizer is working. But I do have to ask you, much in switching places from the renter to the landlord. Now the landlord did most of America. You know, the looking at the portfolio, how do you think about your relationship to money? How do you embrace your relationship to money stay? And how do you think about that? Look, money is obviously in necessity.

18:13Or we always say we gotta keep our lights on and all of that. But my relationship with money has changed over the years because what money allows you to do is to have more time. The most important asset we have in our lives is our time. And the ability to spend time with those that you love and respect the most. For me, those are my family, my daughters, and our team here at ARC. But money doesn't care about me, it doesn't care about you. And so I found that when I really worry, think about process and not results, both in base bond and business and investing. If I have the best team and we're collaborating together and we have a very sound process and we're laser focused, I will make the bet that in the long run, maybe not in the short run, but in the long run, the success and the capital and the resources will follow.

19:00What's the hardest thing with process, Alex? I think it's disciplined. It could be mundane, it can be boring, it can be, we spend a lot of time here in coaching. We have a lot of young talented people. We like to develop our young talent just like we do in sports. We take a lot of things from the sports world and bring them to our world here coaching, sympathy, compassion, all those things are important in leadership. The ROI on that is 10 -fold. I think if you spend the time on the front end, I think the back end is pretty sweet. You mentioned that kind of the transfer ability of skills and mindset from sports business.

19:33I think the one that's really interesting for me is when you're down, when you are losing in either. What is the mind talk that encourages you to not drop your head, not lose confidence? When you think back to Dazen's sport and today, what do you tell yourself when you're down and you're losing to get yourself back on even? I think there's a few things when they're not going in your favor. Some of the things you gotta do is just slow things down a little bit. Continue to be grateful and appreciative and this is hard when things are going bad, right? But you take a step back and say, I live in this great country, I'm healthy, I have family and friends that love me and respect me.

20:08And if you take it all away from me, everything should be just fine. So just a little bit of gratitude always helps. And then I would double down into your health and wellness, really making sure that you're having enough sleep, you're drinking enough water, you're well rested, you get a exercise in, because the more you invest in yourself, the more you're able to deal with real challenges. I think that's kind of been my way. Ah, it's too believe in what life balance. Yeah, I do. I do. But I mean sometimes there's times where you have to sprint and sometimes it's more of a marathon But you have to be able to have the experience the team around you the strategy that when it's gold time and Mark Laurie my partner talks about six gear you have to go to six gear But then it's okay to actually enjoy some of your success to be able to have fun in the culture to be able We play music here at the office because we want the office to be a place where we celebrate each other we work hard, we push each other, we keep each other accountable.

21:10And like sports, when people mess up, we have an environment here that is safe to mess up because we're not trying to, we got you. What are the lessons? Just like in sports, we lose two or a narrow. We're going to get to practice, so we're going to fix this. But we're going to fix it collectively as a team, not to embarrass you, but to help each other out. Because the better the team is, the better we're going to be as a company. How do you create an environment of safety? Why do you do you have that? But also in Northern acceptance of continuous losing, you know if a coach loses 10 games in a row We might need to cut it, but you want him to try.

21:43How do you create that balance? Yeah, I think it starts at the top right we talked about higher and slow and then is Contivating that talent. How do you create an environment? I think it starts with a leader and the leader has to be be able to Stand up and say hey, I take full accountability. This is on me and the more vulnerable you are with your team It creates an environment where they feel safe. That doesn't mean you have to like spill your guts off front of everybody, but it means that at times there's challenges and to be able to come to your senior report person or to someone like myself.

22:16You want to have that culture, you want to have that trust. I've had coaches, hitting coaches, managers, and baseball that I knew they had my best interest in art. And because of that, if they said jump, I would say, I'll high and I would do it without thought. The opposite Harry is also true. I've had coaches that I felt they had my worst interest in heart. Anything they told me, I questioned. So when I take that foul process to the business world is exactly the same thing. The first thing that people that you have to think about is, Harry, if you and I work together, do you really think that I have your best interest in heart?

22:50And the answer is no, we're done. So building that trust early, building that bridge is vital. Penalty number one, you mentioned that kind of best interest at loss. I'm a little bit concerned about the future of the sports industry because we see this flood of PE capital coming in respectfully, largely from our dear friends across the pond in your wonderful nation into English football, but buying English football clubs and just buying sports franchises and is kind of sport is becoming such a business today unlike ever before, which has its pros and cons. How do you foresee the next few years in terms of the business of sports franchises and where the opportunities are in your mind?

23:26I think you have to thread the needle Harry. I think it was beautiful about sports. It's the great passion these progressive owners over the years I can just tell you here about America when you think about Dr. Bus with the Lakers when you think about George Steinbrunner with the New York Yankees Al Davis with the Raiders Robert Kraft Jerry Jones Jerry Rysdorf so many great ones you have this Heart and passion connected to the franchise, which connects with the fan base. You think about what Jerry Ryser has done with the sixth championship with Michael Jordan? Jerry and Michael were very much tied at the hit.

24:01It would be different if it was Michael Jordan tied into Blackstone. It just doesn't have the same feel, and I think Blackstone is the greatest of a great. But if there's a combination area, we can still remain and keep the robber crafts that Jerry Joneses, the bus family, still involved in the forefront. And because these franchises have exploded in enterprise value, then I think is a good mix because you get the capital from the Institutions, but you still get the passion and the follow -through from the robber crafts of the world. What do you think now next like in five years time? How do we see sports franchises evolve and what does that landscape look like?

24:39I'm not sure because if you asked me that question five years ago, I would have been wrong of where we are today. The truth is in the middle of COVID and this you know, direct to consumer and what's happening to the regional sports network deal five years ago, while some people saw some of it, I think someone will be lying if they said I forecasted everything. I think we've seen more changes in the last five years than we've probably seen in the prior 30 years. I think the same is going to be true here in the next five years. A lot of this enterprise values driven by television by the national television deals.

25:13So be interesting what that landscape looks like in the next five, 17 years. But I do think that there's going to be a world where it's going to be a lot more franchise direct to consumer. And that means with the way you watch the sport, how you interact with players, how you interact with buying merchandise and everything in between. Is there any worried about when you get the sports franchise landscape and how it could evolve? I always think about the fanbase and we can never, by the way, my same concern, Harry about sports is my same concern about real estate. I have to think about my mother and my mother was someone who had two jobs and we come from very modest economic background and we cannot forget about my mother.