Speaker 1: Welcome the Money in Wealth with John Hob Bryant, a
Speaker 1: production of the Black Effect Podcast Network and iHeartRadio. This
Speaker 1: is John Hope Bryant and this is Money and Wealth,
Speaker 1: and I'm honored to be here with a new friend,
Speaker 1: Alex Rodriguez. Men he would know him as a Rod.
Speaker 1: Let me give you the part that's easy for all
Speaker 1: the baseball fans. You may or may not know that
Speaker 1: he came from the Dominican Republic. His family were immigrants.
Speaker 1: Victor Rodriguez's father and Lord is Nellie Nevado Mellow. I
Speaker 1: hope I said that right his mother. They came from Well,
Speaker 1: he came. It was born in nineteen seventy five in
Speaker 1: Washington Heights section of Manhattan and came to this country
Speaker 1: with a dream. He was raised alongside his siblings Joe
Speaker 1: and Susie, and achieved incredible things in his professional career
Speaker 1: that started, as you know, playing twenty two seasons in
Speaker 1: Major League Baseball. That's the Seattle Mariners, the Texas Rangers,
Speaker 1: the New York Yankees, and of course later as chairman
Speaker 1: CEO of a Rod. But we're going to get into
Speaker 1: that because it actually wasn't later. It was actually almost
Speaker 1: right away. But I'm getting ahead of myself. And he
Speaker 1: has been passionate about business and sports and community. And
Speaker 1: I will say, from my own perspective, I would say
Speaker 1: the maximization and unleashing of untapped human potential at scale.
Speaker 1: We'll talk about a little bit about that about with
Speaker 1: regard to how he treats his employees. Alex and I
Speaker 1: spent some time in the community a few months ago
Speaker 1: here in Atlanta at Clark Atlanta University. He showed up
Speaker 1: very simply for no compensation, because he was asked to.
Speaker 1: And so this is an important conversation about things that
Speaker 1: matter most at a time where everything matters. And I'm
Speaker 1: honored to be with my new friend Alex Rodriguez John.
Speaker 2: Great to be here, man. We've been looking forward to
Speaker 2: doing this together.
Speaker 1: We have. We have, And the story of your sports
Speaker 1: success is a topic of obvious legend. And I don't
Speaker 1: know if you get tired of talking about it or not,
Speaker 1: but I want to talk about your sports success from
Speaker 1: a different window, a different vantage point. I want to understand.
Speaker 1: Was this always about you aspiring to do more? My
Speaker 1: guess is initially you were passionate, absolutely passionate about baseball,
Speaker 1: that was when you were in the Dominican Republic. That
Speaker 1: was something that you obsessed on, Is that right?
Speaker 2: Yeah? Look, ever since you know, I was born in
Speaker 2: New York. I was born in the shadows of Yeshiba
Speaker 2: University right around one eighty third, nineteen seventy five, very
Speaker 2: close to Yankee Stadium. My father owned a shoe store
Speaker 2: in our apartment. And very much like my father, ever
Speaker 2: since I was ten years old, I've always wanted to
Speaker 2: be a baseball player and a businessman, and I was
Speaker 2: fairly good with numbers. My father was too, and I
Speaker 2: had a passion for it, and ever since I was
Speaker 2: a rookie and I got drafted in nineteen ninety three
Speaker 2: by the Seattle Mariners with the one pick overall in
Speaker 2: the first round, I was thinking about life after baseball
Speaker 2: because I've seen enough examples of players that have gone
Speaker 2: like me, from rags to riches back to rags, and
Speaker 2: I didn't want to be an addition to that, you know,
Speaker 2: unfortunate number or statistic. So that was my passion early on,
Speaker 2: was to have a path to have a good life
Speaker 2: post baseball.
Speaker 1: You were inspired by that balance initially from your day,
Speaker 1: Is that right? Yep? Yeah, and mom is where you
Speaker 1: got the self esteem. She poured the love in you
Speaker 1: and said, you can do anything.
Speaker 2: Is that right? Yeah? You know. My father he passed
Speaker 2: some years ago, and he left us when he was ten.
Speaker 2: And I never saw in those ten years my father
Speaker 2: raise his voice once. Even though he was an alcoholic.
Speaker 2: He would drink twenty twenty four beer cans a day,
Speaker 2: Budweiser I'll never forget, and two packs of cigarettes a day.
Speaker 2: So my mind is a ten year old John. I
Speaker 2: thought my father's going to be dead by the age
Speaker 2: of thirty. There's no way that anyone can live this
Speaker 2: type of lifestyle. But never saw him drunk, even though
Speaker 2: I'm sure he was. But he was an acting alcoholic
Speaker 2: and very functional. And amount of cigarettes he was smoking
Speaker 2: my house was like intoxicating. But my mother. I got
Speaker 2: my toughness and my grit and my work ethic from her.
Speaker 2: She worked at General Mortars for over twenty years and
Speaker 2: then when dad left, she had to pivot. Once we
Speaker 2: arrived in Miami at the age of nine, and I
Speaker 2: joined the Boys and Girls Club. She was a secretary
Speaker 2: of the morning and surf table at night, and I
Speaker 2: remember her coming home after twelve hours of working around midnight,
Speaker 2: sometimes eleven o'clock at night, and I would just be
Speaker 2: watching finishing, watching the Mets game, watching Kinner's corner, and
Speaker 2: I would give her a big hug, and I would
Speaker 2: take her pouch where she had her tip money, and
Speaker 2: I would start counting that money. And you know, on
Speaker 2: Thursdays and Mondays, Tuesdays it was thirty two twenty eight
Speaker 2: dollars twenty nine thirty. But Friday and Saturdays with the
Speaker 2: big ticket nights, and she would come home sometimes with
Speaker 2: fifty eight fifty nine sixty bucks. I said, boy, we're
Speaker 2: richer than Warren Buffet. We made it big. But then John,
Speaker 2: she did something interesting. She would then take that pouch
Speaker 2: and put that money out and put it in an
Speaker 2: envelope yep. And then she would say, son, help me
Speaker 2: pick up the mattress. And I remember, like an eleven
Speaker 2: year old boy, like everyone's yesterday, she would take that
Speaker 2: envelope and put it right under that mattress. And I said, Mom,
Speaker 2: but wait a minute, there's banks all around our neighborhood.
Speaker 2: Why don't you go put the money there? And being
Speaker 2: an immigrant mother and not trusting banks, she goes, Son,
Speaker 2: we don't trust banks, we trust cash, and we trust
Speaker 2: our mattress. So that was the start for me where
Speaker 2: I said, financial literacy is going to unlock my future
Speaker 2: and hopefully get me out of this neighborhood.
Speaker 1: You and I have a lot in common. The more
Speaker 1: I hear about your story, the more we relate to mine.
Speaker 1: My mom told me she loved me every day in
Speaker 1: my life, just like your mother told you. She worked
Speaker 1: as a seamstress. My dad was a business owner and
Speaker 1: had issues. He had other problems, was an alcohol but
Speaker 1: had other challenges that but deubled him. I could relate,
Speaker 1: and I'm very proud of how you have how you
Speaker 1: circumnavigated that entire situation and found always that sweet spot
Speaker 1: of what was most important. And so now I'm going
Speaker 1: to pivot back to something I said earlier, which is, yes,
Speaker 1: you're passionate about baseball. Killed it for twenty two seasons,
Speaker 1: became a legend in baseball. I'm sure lived your dream
Speaker 1: made everybody proud, both in New York and in the
Speaker 1: Dominican Republic, maybe even all of Latin America. But you're
Speaker 1: dreaming also parallel about business, and I understand it your
Speaker 1: first at the time, you're the largest contract of anybody
Speaker 1: who signed a baseball contract. There was over two hundred
Speaker 1: million dollars at the time. As I understand it, your
Speaker 1: first call was to Warren Buffett.
Speaker 2: Yeah, but you know, one hundred percent right with one edition.
Speaker 2: Pre setting that big deal, I didn't have a lot
Speaker 2: of capital. I was just a young kid that I
Speaker 2: entered the big leagues at eighteen, and somewhere on twenty
Speaker 2: one or twenty two. Before I got paid, I made
Speaker 2: my first investment and that was a duplex and that
Speaker 2: duplex was about two hundred and fifty thousand dollars right
Speaker 2: around Miami Arena, right there on fis Gain and I
Speaker 2: had a forty eight thousand dollars down payment and that
Speaker 2: was the start of basically what is now called a
Speaker 2: Rod Corp. And once I got my contract with the
Speaker 2: Texas Rangers, I was naive enough to think, well, if
Speaker 2: Warren Buffett, who ensured my contract, and that got back
Speaker 2: to me, I said, well, now we're partners, so let
Speaker 2: me call him and make sure that I'm going to
Speaker 2: let him know his money is safe with me because
Speaker 2: I don't plan on getting injured. And of course I
Speaker 2: send an email. I thought I would never get an
Speaker 2: email back, and he sure responded about you an hour
Speaker 2: later and I said, if you're ever available, will love
Speaker 2: down to come down to Omaha and have lunch with you.
Speaker 2: And he said, how's October And I said, well, we're
Speaker 2: not going to the playoffs, I'm totally free. And that
Speaker 2: started a series of about five to seven years of
Speaker 2: me going there every year postseason one to make sure
Speaker 2: that the insurance money was good because I was looking
Speaker 2: healthy and good. And second he became a mentor where
Speaker 2: he would basically look at all my businesses and give
Speaker 2: me great advice.
Speaker 1: He ensured your contract through one of the businesses that
Speaker 1: he has.
Speaker 2: Is that right, yeah? Or I mean he probably did
Speaker 2: it from his balance sheet, right. It was he was
Speaker 2: trying to get the We were trying to share the
Speaker 2: last third of it of a ten year contract because
Speaker 2: it was such a new thing of a contract that long.
Speaker 2: There wasn't any precedent, right, So we got the first
Speaker 2: seven years insured, but the last three were having a
Speaker 2: hard time because it was hard to forecast that far out.
Speaker 2: But one basically said, yeah, if you sent me this check,
Speaker 2: I'm sure the last three years and that was the
Speaker 2: end of it. And thank goodness, we cement to the deal.
Speaker 1: So I don't think, and I don't want to presume
Speaker 1: or assume, Alice, that the audience understood what we just said.
Speaker 1: They just see you playing baseball, They see their favorite
Speaker 1: athletes just doing what they do, and they just assume
Speaker 1: that the check, you know, is coming in the mail,
Speaker 1: and like they get the check to their employer. Now
Speaker 1: you just unpacked the whole other situation, as they say
Speaker 1: in my neighborhood, where a contract is underwritten for insurance.
Speaker 1: Can you explain that just a little bit before we
Speaker 1: go first.
Speaker 2: Sure. Essentially, John, let's just say that, you know, I
Speaker 2: give you a one hundred million dollar contract and it's
Speaker 2: ten years, and it's ten million dollars a year. Right,
Speaker 2: it's one hundred I'm going to have to go ensure
Speaker 2: that contract, meaning that if in year three John breaks
Speaker 2: his knee injures himself, well he can no longer play
Speaker 2: for the rest of his career. I'm still, as the
Speaker 2: owner on the hook for seventy million dollars. I have
Speaker 2: an insurance policy that, let's just say I paid two
Speaker 2: million dollars for that premium, would essentially take care of
Speaker 2: the seventy million dollars and now I'm off the hook.
Speaker 2: John has paid his balance of seventy million dollars and
Speaker 2: the insurance takes it on the chin. But in most cases,
Speaker 2: John is going to remain healthy and that two million
Speaker 2: dollars premium basically goes to the wayside on my end.
Speaker 2: But you and I can sleep at night because the
Speaker 2: contract is insured and the insurance wins in this case.
Speaker 1: So before I ask you the question about who paid
Speaker 1: the premium, there's an interesting take on it, whether you
Speaker 1: as a contractor or the owner of the team. But
Speaker 1: for the audience, what do you just describe? Think about
Speaker 1: an insurance premium for your house. Think about an insurance
Speaker 1: premium for a life insurance policy are your card. That
Speaker 1: premium is a small fraction of the value of the insurer.
Speaker 1: They hope that they you never call them with a claim.
Speaker 1: And this is how people not all claims. Is how
Speaker 1: the insurance company makes a profit. And you want the
Speaker 1: insurance company to make a profit in this that's way
Speaker 1: capitalism works. And there's too many claims. Of course, they
Speaker 1: could go out of business. Uh So, in this particular case,
Speaker 1: there was a premium. Alex Is, the corporation this is
Speaker 1: this is this is separate from a rod This is
Speaker 1: Alex Rodriguez, the professional athlete, has got a two hundred
Speaker 1: million dollars contract, and he is the product and is
Speaker 1: a premium for the underwriting of insurance for that contract.
Speaker 1: Now else who paid? But I hope not getting into
Speaker 1: your business. Now, let me put it another way. Was
Speaker 1: this sponsored by the owners of the team?
Speaker 2: Yeah, so it is the responsibility of the owner to
Speaker 2: ensure the contract because obviously, as I just explained, if
Speaker 2: you have one hundred million dollar contract and things go
Speaker 2: the wrong way and you get injured, I, as the owner,
Speaker 2: don't want to be on the hook for that seventy
Speaker 2: million dollars because John's not available to play. So the
Speaker 2: owner in this case. In this case it was Tom
Speaker 2: Hiks who was the owner of the Texas Rangers. He
Speaker 2: wires the money to warm buffet.
Speaker 1: Right. The reason I asked the question is, you know
Speaker 1: you could, as entrepreneurial as you are in your mind
Speaker 1: if the owner said, look, I'm going to do five
Speaker 1: years of this or three or five years of this contract,
Speaker 1: I'm not going to ensure ten years of it. I'm
Speaker 1: thinking the entrepreneurial Alex and I know would say, well,
Speaker 1: let me go to Lloyd's of London. Let me go
Speaker 1: someplace and see if I get the back end insured myself.
Speaker 1: I'll write the premium check and there's a small price
Speaker 1: to pay to know I've got the guarantee of all
Speaker 1: the money. So there's a number of ways to cut this.
Speaker 1: But in this particular case, they felt so strongly about you,
Speaker 1: and of course you were such a wonderful negotiating position
Speaker 1: that you got the entire contract he is guaranteed. Is
Speaker 1: that right?
Speaker 2: Yeah, you're spot on, John, So let me add to that.
Speaker 2: So a lot of times and I did this exactly
Speaker 2: what you just described, that the team is trying to
Speaker 2: ensure that contract for protection of a downside event of
Speaker 2: an injury the player, me or you. In this case,
Speaker 2: you can go to Lloyd's of London and say, look,
Speaker 2: if I'm supposed to be playing for fifteen years, but
Speaker 2: I get hurt and I'm only allowed to play for
Speaker 2: five years, then Lloyd's of London will give you an
Speaker 2: additional check to John. Now, assuming that you play those
Speaker 2: ten years injury free, the John insurance that you paid
Speaker 2: to Lloyds to London that goes away. You lost that money,
Speaker 2: but you made the hundred and the team is very
Speaker 2: happy to lose two million because John played incredibly well.
Speaker 2: So double ways of insurance and by the way, you
Speaker 2: can also ensure your house a couple different ways than
Speaker 2: just one.
Speaker 1: And for those we unpack everything on this podcast. We
Speaker 1: make things simple so you understand it. But nobody ever
Speaker 1: talked to you financial literacy like Alex mother and my
Speaker 1: mother taught me in the beggar of my classroom. So
Speaker 1: we want to there's no silly questions. There's nothing that
Speaker 1: is that is off limits. By the way, doctor King
Speaker 1: in the middle of the civil rights movement try to
Speaker 1: get his life insurance and try to get a million
Speaker 1: dollars of insurance for his family. And Andrew Young pastor
Speaker 1: Andrew Young as we know now and him went to London,
Speaker 1: literally going to London. It ran around. No one would
Speaker 1: insure him Alex. They thought he was just too much
Speaker 1: of a risk, and he was only you know, he
Speaker 1: was thirty something years old. They just figured, you know,
Speaker 1: the chance of something happened to you is extremely high.
Speaker 1: He's a guy about to get the Nobel Peace Price.
Speaker 1: They finally got one of the million dollars they finally
Speaker 1: got one hundred thousand dollars. Premium was very high because
Speaker 1: the perception of risk was very high. Just because you're
Speaker 1: on the front page of the newspaper doesn't mean that
Speaker 1: you automatically get a yes to your answer. But underneath
Speaker 1: a lot of these things are insurance policies, and older
Speaker 1: you get the most expensive that policy gets. If you're
Speaker 1: getting a life insurance policy, it's very cheap to get
Speaker 1: one at twenty thirty years old. Try to get into
Speaker 1: life insurance policy at seventy years old for your life,
Speaker 1: the premium is going to be astronomical. And you can't
Speaker 1: be mad at the companies. If you want to distribute
Speaker 1: money like a socialist, you got a first collected like
Speaker 1: a capitalist. So we want companies to find a way
Speaker 1: reasonably to make a profit so they can afford to
Speaker 1: get back and reinvest and take care of their employees.
Speaker 1: And on the topic of taking care of his employees,
Speaker 1: I want to gut into that in a minute, but
Speaker 1: I want to commend you also, Alex. I don't know
Speaker 1: that if anybody set this to you in this way,
Speaker 1: but my sense is that you're the only or the
Speaker 1: first Latino billionaire entrepreneur from professional sports in America. I
Speaker 1: don't think there's anybody else who has that Moniker. First
Speaker 1: of all, I don't know another Latino a billionaire in America.
Speaker 1: I'm sure they exist, but one that came from sports
Speaker 1: to business. There's no question in my mind that you
Speaker 1: check that box. And I think you just got into
Speaker 1: the billionaires club late lash year. So assuming I'm correct
Speaker 1: of all that, on all that, congratulations.
Speaker 2: Well thank you John. And you know what, again, I
Speaker 2: started from literally like ground zero. I'll never forget John,
Speaker 2: And I think I told you this when we had dinner.
Speaker 2: You know, I was twelve years old, and you know,
Speaker 2: Dad had left a couple of years ago, and we
Speaker 2: were at Publics, a supermarket down in Miami, and I'm
Speaker 2: with my mom on one of the rare nights that
Speaker 2: she didn't work. It was probably like a Sunday night
Speaker 2: or something. And as we're trying to pay for the bill,
Speaker 2: the bill might have been like seventy five bucks or something.
Speaker 2: We had like a couple of cars of food and
Speaker 2: cereal and all of that, and as she's kind of
Speaker 2: shuffling through her purse, some funny money comes out and
Speaker 2: I said, Mom, that money's read, well, it looked like
Speaker 2: monopoly money. What is that? And she was very embarrassed
Speaker 2: and ashamed and kind of looked down, and she goes, well,
Speaker 2: you know, the government's given us some help. And my
Speaker 2: heart stopped. You know, even as a twelve year old,
Speaker 2: my instincts were too, very very protective of my mother.
Speaker 2: And to be where I am today, play for almost
Speaker 2: twenty five years and be very fortunate to be part
Speaker 2: of an ownership group. You also have to commend, you know,
Speaker 2: Adam Silver in the NBA that he's opened up the
Speaker 2: floodgates to have folks like you and I sit at
Speaker 2: the very top of the chain as governors. It's extraordinary.
Speaker 2: And I know that Adam and the NBA has great
Speaker 2: ambitions to continue to promote diversity and more folks like us,
Speaker 2: people of color to the owners group.
Speaker 1: No doubt. And I'm an owner of part of Centennial Yards,
Speaker 1: which is right across from State Farm Arena, as a
Speaker 1: partner with Tony Wrestler who owns Atlanta Hawks, and Tony
Speaker 1: is a big who accommodations definitely, the Adam Silver who's
Speaker 1: a part of financial literacy for all, Tony is a
Speaker 1: big booster that civil rights. Modern civil rights is in
Speaker 1: the suites, not the streets, and the color is green.
Speaker 1: It's about education, access the capital, low cost capital, an
Speaker 1: opportunity for all. It's Michael mill And would say, this
Speaker 1: is where we I think we originally where we physically
Speaker 1: met our friend Michael. Intelligence is equally distributed, but opportunity
Speaker 1: is not. And so we are at these tables and
Speaker 1: we should not take it for granted. And thank you
Speaker 1: for doing this podcast to help to spread the message
Speaker 1: of unpacking the memo. We unpacked a little bit about
Speaker 1: insurance and about how you underwrite a long term professional contract.
Speaker 1: I'm sure the audience didn't know that we're going to
Speaker 1: get into it. Well, here's another get. There is no
Speaker 1: billionaire who came from professional sports or entertainment who's a
Speaker 1: person of color, who didn't go over the bridge of business,
Speaker 1: particularly corporate. I'll say that again. There is no professional
Speaker 1: athlete that you're listening that you're thinking about right now.
Speaker 1: Our entertainer, think jay Z, think whoever you like who
Speaker 1: went from performing, playing whatever into the boardroom and became
Speaker 1: a billionaire without coming into corporate. So this is a
Speaker 1: pathway that everybody needs to understand. We've got to go
Speaker 1: from the streets to the suites, from protesting to prosperity,
Speaker 1: and there needs to be a business plan for that.
Speaker 1: So your obsession, your dual obsession with being smart at
Speaker 1: the baseball diamond, then smart as a diamond in your brain,
Speaker 1: and then getting into real estate, which was a really
Speaker 1: smart move, biggest business in the world. What was your
Speaker 1: motivation there? And then treating your employees your second biggest
Speaker 1: asset the right way is I understand it. You make
Speaker 1: employees shareholders in your dream as well, because nobody washes
Speaker 1: rental cars. What's your mindset there? And I'm now getting
Speaker 1: into the most valuable thing we have, Alex. It's not
Speaker 1: the money, it's not the assets, it's not the real estate.
Speaker 1: It's our mindset and our relationship capital. The way we
Speaker 1: treated each other, way you and I treated each other
Speaker 1: when we first met set the stage for everything. I
Speaker 1: asked you to come to Atlanta originally your office set.
Speaker 1: You didn't have time, and you didn't and I said
Speaker 1: this was for the people. Now, only one would know
Speaker 1: this unless I said this is for the people. This
Speaker 1: is no commercial there's no commercial anything in this. And
Speaker 1: you just said, yes, I'll do it. And you came
Speaker 1: here at your own expense and spent several days with us,
Speaker 1: pouring into the people. And I think that's going to
Speaker 1: pay dividends, not only in Heaven, it's gonna pay dividends
Speaker 1: here because whatever it goes around comes around. But that's mindset,
Speaker 1: that's character, that's integrity, that's how you treat people, treat
Speaker 1: them how you want to be treated, and that carries
Speaker 1: over how you treat your employees. Talk to me about
Speaker 1: your mindset to win and why you think it's important
Speaker 1: to bring others with you.
Speaker 2: Yeah, great question. And we had a phenomenal time and
Speaker 2: boy was at an impactful day when we were at
Speaker 2: that university and talking about some of the history around
Speaker 2: some of the Black college and the history of of
Speaker 2: what has done for so many people. And very proud
Speaker 2: to be there and thank you for that invite. Look, John,
Speaker 2: the way I look at this is like financial freedom
Speaker 2: comes from two things. It comes from knowledge and the
Speaker 2: power of knowledge, and equity and ownership. And it's kind
Speaker 2: of what the rich that poor dad teaches, Right. I
Speaker 2: get excited when I get to invest into equity, and
Speaker 2: I think most people get scared. And the truth is
Speaker 2: if you're scared and you don't know, it's probably better
Speaker 2: to have fear right rather than than jump in and
Speaker 2: do something that's wrong with well, not the right leadership
Speaker 2: group around you. I've often said that the three things
Speaker 2: that could take a man down or people down in
Speaker 2: the world of business are the three l's, liquor, ladies,
Speaker 2: and leverage. So you got to watch those things. But
Speaker 2: to me, John, it's really about simplicity and sticking to
Speaker 2: your circle of confidence, which I learned this over two
Speaker 2: decades ago from Warren Buffett. And the reason why I
Speaker 2: started with multifamily apartments and a small little duplex is
Speaker 2: because I understood it because we were never We never
Speaker 2: had enough money to buy anything. So I remember as
Speaker 2: a ten twelve year old boy, I went down to
Speaker 2: my knees and I said, Dear God, if I can
Speaker 2: ever trade places with the landlord. And about a decade
Speaker 2: later I had an opportunity to be a landlord, even
Speaker 2: though it was a small landlord of two apartments a
Speaker 2: little duplex. I bought that, and all I was really
Speaker 2: doing was I knew that at some point my ability
Speaker 2: to make money from the Yankees was going to come down.
Speaker 2: But if I had assets that would hedge my bet,
Speaker 2: and as my earning power came down, my assets would appreciate.
Speaker 2: Now I knew that I didn't need a lot of
Speaker 2: cash flow, so I was able. My strategy was simple,
Speaker 2: If I can play for ten more years and I
Speaker 2: buy one asset per year, appreciate in value and in
Speaker 2: cash flow. By the time I was done, those ten
Speaker 2: assets would be my insurance policy for never going broke.
Speaker 2: And that was it. It was nothing from Einstein. It
Speaker 2: was nothing. I'm not that smart, but you try to
Speaker 2: be clever and try to be smart and work as
Speaker 2: hard as you can with your competitive advantage. And I
Speaker 2: thought that was mine.
Speaker 1: So audience, you just heard and Alice says, I I
Speaker 1: know this about me. We exactly the same philosophy. I
Speaker 1: had this nonprofit it was draining me dry, not really,
Speaker 1: not literally, but I mean it was nonprofits are hungry.
Speaker 1: And Alice, by the way, volunteers at the Boys and
Speaker 1: Girls Club as well, and mentors. And I didn't want
Speaker 1: to go beg in anybody. I wanted to be my
Speaker 1: own resource. And so I went and start buying single
Speaker 1: family residential homes and he started buying multifamily homes and
Speaker 1: we are both together two of the artist people of
Speaker 1: color who own both. I think as an afric American
Speaker 1: close to seven hundred single families, and he's got an
Speaker 1: incredible portfolio of like mostly multifamily Why because you make
Speaker 1: money during the day, you build wealth in your sleep.
Speaker 1: The contract that Alex got, that was the grease on
Speaker 1: the gears. You can get rich, but you can also
Speaker 1: go broke because the cash flow stops and you go broke,
Speaker 1: but your expenses have not. Please listen now what he
Speaker 1: said he said to you said it very eloquently. The
Speaker 1: cash flows coming in, your expenses are now rising the
Speaker 1: mediate standard of living. Your cash flow of the contract's
Speaker 1: going to end because seventy percent of all those in
Speaker 1: professional sports, unfortunately will file bankruptcy within five years. You've
Speaker 1: got to have something to augment that. And he did
Speaker 1: that through capital gains and capital asset well, capital appreciation
Speaker 1: of capital assets asset accumulation through real estate, which gave
Speaker 1: him both appreciating assets and income that replaced the income
Speaker 1: he has as a player. They get that, right, Alex.
Speaker 2: That's exactly right. And even to simplify it and just
Speaker 2: make it even more simple, because I know this is
Speaker 2: what the mission of this podcast is is to educate
Speaker 2: and inspire and to teach people how to have a
Speaker 2: better life. If he or she is listening right now
Speaker 2: and you know that you're making one hundred thousand a year,
Speaker 2: but that's going to stop in ten years, then you
Speaker 2: better start hustling today for what's gonna happen in year eleven. So,
Speaker 2: in very simple terms, if that is your life, that
Speaker 2: is the life of an athlete, just add a couple
Speaker 2: of zeros to it. But nevertheless, you have a partner,
Speaker 2: and if you're in La or New York, that partner
Speaker 2: is going to take sixty percent of it between taxes,
Speaker 2: agents and managers and john People ask me is all
Speaker 2: the time, how in the world does an athlete make
Speaker 2: over one hundred million dollars and, like you mentioned so eloquently,
Speaker 2: can go bankrupt. Well, let me give you an example.
Speaker 2: If athlete name Chris makes one hundred million dollars a year,
Speaker 2: one hundred million dollars in their career, and they're playing
Speaker 2: for the Yankees, or they're playing for the Lakers, or
Speaker 2: they're playing for the Dodgers, fifty five percent goes to
Speaker 2: the government. So now you're down to forty five million,
Speaker 2: ten percent goes to your manager. Now you're down to
Speaker 2: thirty five million, five percent to your agent. Now you're
Speaker 2: inside thirty million dollars. You haven't about a house, you
Speaker 2: haven't bought a car yet, and you haven't even been
Speaker 2: divorced for the first time.
Speaker 1: Well paid alimony for all those kids.
Speaker 2: All of that, So it goes quickly. It goes quickly.
Speaker 1: So what we're saying to you audience is anybody can
Speaker 1: be an Alex or John financially. Just take away a
Speaker 1: couple of the zeros. Start simple. He made it. He
Speaker 1: had an income that allowed him to provide for his
Speaker 1: lifestyle and make an investment. I want you to have
Speaker 1: a good income. Think about a house in the hood,
Speaker 1: the worst house in the best block, by it, rebit
Speaker 1: or a duplex, buy it, rehabit, rent it. I would
Speaker 1: say hold it, Alex may say sell it. I don't.
Speaker 1: But you know everybody's economics are different. Do that two
Speaker 1: or three times and you create a generational wealth and
Speaker 1: Alex it's just as Alex has paid it, poured into
Speaker 1: his own community and doubling and invested back in with
Speaker 1: his employees. Still want to hear that story? I want
Speaker 1: you to think about hiring local talent from the community.
Speaker 1: Is plumbers, electrician lighting, roofing, landscaping, painting. Now you're creating
Speaker 1: local jobs, reinvesting. That's your philanthropy. Magic Johnson is one
Speaker 1: of your mentors that helped you to navigate what you've done.
Speaker 1: Really good guy. What was the influence on you to
Speaker 1: double down on this and go large? And again, I
Speaker 1: want you to touch very specifically about how you're helping
Speaker 1: your employees that I really was touched by how you're
Speaker 1: doing that just not what you're doing because you back them,
Speaker 1: you backstop them. And before we finish, I really want
Speaker 1: to get into when you hit your head against the wall,
Speaker 1: when you stubbed your toe, it's all has not been
Speaker 1: a bed of roses, like because you had to take
Speaker 1: no for vitamins. Everybody's not just saying yesterday because you're
Speaker 1: Alexe Rodriguez, Like, hey man, you're a baseball player. Go
Speaker 1: go ad over there. You know you had to you
Speaker 1: had to earn your CD at the table.
Speaker 2: Yeah, yeah, great, great question. So, first of all, Magic
Speaker 2: Johnson was my my my kind of my beacon of inspiration.
Speaker 2: I mean, he gave me an opportunity to say he
Speaker 2: gave me a role model. And Magic. Johnthan is such
Speaker 2: an incredible person. You know, he's he's one of the
Speaker 2: greatest basketball players of all time, one of the goats, right,
Speaker 2: five time world champion, MVPs, you know, a gazillion dollar smile.
Speaker 2: But when you meet Magic, he's even more inspirational. And
Speaker 2: he's such a good man that he sat down with
Speaker 2: me for three hours and basically gave me a roadmap.
Speaker 2: And I had nine pages of notes. And I said, Magic,
Speaker 2: we were supposed to meet years later for thirty minutes.
Speaker 2: Why did you give me three hours and cancel dinner
Speaker 2: with Cookie? He said, you know what, because you're one
Speaker 2: of the first athletes, if not the only one that
Speaker 2: came with a notebook. You came on time, you were
Speaker 2: asking good questions, and you had like ten pages of notes.
Speaker 2: And I thought that was interesting. But because he's a
Speaker 2: man of color, I saw a path and an inspiration
Speaker 2: of someone who could be a Hall of fame basketball
Speaker 2: player and then be a hall of fame businessman in
Speaker 2: the boardroom. So that was a pathway. When you look
Speaker 2: at a Rod Corp. We have over five hundred employees.
Speaker 2: We call them team members. Eighty five percent of those
Speaker 2: are minorities, men of color, black skin, brown skin, women.
Speaker 2: And I was inspired by my mother because my mother
Speaker 2: never had an opportunity to invest with Warren Buffett or
Speaker 2: Blackstone or KKR Goldman Sachs and JP Moorean wouldn't even
Speaker 2: take her calls. So as I think about our investment,
Speaker 2: if we make an investment of ten million dollars into
Speaker 2: a company, every person on my team has an opportunity
Speaker 2: even if it's two thousand dollars to invest with me
Speaker 2: pro rata, with me side by side, right and my value,
Speaker 2: no promote, no fees, because I want everybody on my
Speaker 2: team to have a path to have in a better life.
Speaker 2: And the way you have a better life, as we
Speaker 2: talked about, is by having more assets and less liabilities.
Speaker 2: A liability is a car, an asset is a house
Speaker 2: is a multifamily is part of a business that generates
Speaker 2: cash flow. Another way of saying it, john for your audience,
Speaker 2: is what is the difference between a liability and an asset.
Speaker 2: Liability takes money out of your pocket every month like
Speaker 2: your home, and an asset puts money in your pocket
Speaker 2: every month like a multifamily. Apartment. Okay, So it always
Speaker 2: bothered me that only the rich people, at least it
Speaker 2: felt from my prism when I was really young, had
Speaker 2: the opportunity to invest with the Warren Buffetts like. And
Speaker 2: today my mission is to work on financial literacy for
Speaker 2: my community and secondly to give people an olive branch
Speaker 2: and an opportunity to invest. Side side.
Speaker 1: That's right, even.
Speaker 2: If it's two thousand dollars. That never made any sense
Speaker 2: to me that only rich people get to invest in assets.
Speaker 2: How about the poor people? Okay? That was me. That's
Speaker 2: my mom, right, So that's one. And if you don't
Speaker 2: have the money, John, what I'll do is as an example,
Speaker 2: and I did this with one of our team members.
Speaker 2: They didn't have the money. It took fifty thousand dollars.
Speaker 2: I fronted the fifty for them. Yeah, became five hundred thousand.
Speaker 2: They paid back my fifty with an eight percent coupon,
Speaker 2: and then they kept about four hundred thousand dollars profit
Speaker 2: and they put down zero. So now the next investment,
Speaker 2: they're putting down two hundred thousand and have two hundred
Speaker 2: in the bank. And that brings a lot of joy
Speaker 2: to me as a leader of my company.
Speaker 1: My friends have told me, Alex, to slow yourself down,
Speaker 1: stop talking so loud, long and fast, and explain this
Speaker 1: to me. You mentioned word coupon. You mentioned the word promote.
Speaker 1: Can you get so promote is something that Alex and
Speaker 1: I love. Think about a license anyway, explain to them
Speaker 1: in your words promote and coupon all we love both
Speaker 1: of those phrases. But watch explain that, Alix in your word.
Speaker 2: So if I lend John, my friend here, one hundred
Speaker 2: thousand dollars and he pays me eight percent, I'm so
Speaker 2: glad you said that, John, because all these fancy terms
Speaker 2: and accurate, they're just there to confuse people, right, our
Speaker 2: people in our community. So that's a great question. We
Speaker 2: take it for granted sometimes because that's the way you
Speaker 2: and I talk when we're in your office or my office.
Speaker 2: So I lend John one hundred thousand dollars, he pays
Speaker 2: me eight percent. So essentially he's paying me eight thousand
Speaker 2: dollars a year on that hundred right, And that's called
Speaker 2: the coupon. Right, And if that coupon is out for
Speaker 2: three years, eight thousand times three, he owes me twenty
Speaker 2: four thousand dollars. Essentially, right now, if John and I
Speaker 2: are partners and we buy a business for one hundred
Speaker 2: thousand dollars and five years later we sell that business
Speaker 2: for a million one, essentially there's a million dollars of profit.
Speaker 2: And because John and I are the code GPS on
Speaker 2: that million dollars of profit, once they get their money
Speaker 2: back our investors plus an eight percent coupon or return,
Speaker 2: then there's about plus or minus a million dollars of profit,
Speaker 2: which twenty percent of that goes to John and I.
Speaker 2: And that's two hundred thousand dollars that John and I
Speaker 2: get for putting the deal together, underwriting it, managing it,
Speaker 2: sourcing it, and essentially bringing value to it. So John
Speaker 2: and I walk away with two hundred thousand dollars. So
Speaker 2: our partners are super happy because they got them a
Speaker 2: ten X, and John and I are happy because we
Speaker 2: were able to promote a great deal and then we're
Speaker 2: off to the next one.
Speaker 1: So you might have been thinking about it. People might
Speaker 1: be hearing like a concert promoter, right, I guess you
Speaker 1: know can generally get your hands around it. But it's
Speaker 1: a deal promoters, it's an investment promoter. So the promote
Speaker 1: is the percentage of the profit that the developer gets
Speaker 1: by bringing the deal to market successfully, and they value
Speaker 1: added on top of the cost and agreed coupon. He
Speaker 1: said it much better than I I did.
Speaker 2: Te let me add one, thanks for our listeners and
Speaker 2: our viewers listening in. John and I only make that
Speaker 2: promote if we make money for investors. He very very important.
Speaker 2: We have complete alignment. If that's a donut and we
Speaker 2: don't make any money, John and I are out. We
Speaker 2: don't make any money. We only make money once the
Speaker 2: investor gets their money back plus an eight percent coupon
Speaker 2: right return on their investment. Then after that waterfall, which
Speaker 2: is called the waterfall, once we do all of that
Speaker 2: at and we have a million dollars left in profits,
Speaker 2: then John and I split that eighty twenty eighty goes
Speaker 2: to the investor and that twenty percent goes to John
Speaker 2: and I as code general partners.
Speaker 1: The first time I might mention the word waterfall to me,
Speaker 1: I was actually looking for where we're going on vacation, like,
Speaker 1: what's the waterfall? So for the listeners, the waterfall is
Speaker 1: the way in which the transaction breaks out. How's that
Speaker 1: dollar split up? What's the waterfall, who gets the well,
Speaker 1: who gets what first right? And what's the priority of
Speaker 1: the distribution I'm playing, I'm saying this in plain English.
Speaker 1: That's what we call a financial waterfall. I want you
Speaker 1: guys to become an experts and all this stuff so
Speaker 1: no one can uh. As Malcolm Mick said, we've been
Speaker 1: bamboozo We've been tricked, We've been fooled. I don't wantybody
Speaker 1: to fool you anymore. I want you to be financially literate,
Speaker 1: because it's not what you're not dumb and you're not stupid.
Speaker 1: It's what you don't know that you don't know that
Speaker 1: is killing you. But you think you know because no
Speaker 1: one ever taught you.
Speaker 2: I agree with that, and I think sometimes he's acronym.
Speaker 2: Sometimes are made to keep our people out of the
Speaker 2: room and keep them not smart, and really our listeners
Speaker 2: are very, very smart. We just have to have better
Speaker 2: teachers that are willing to teach and bring people along
Speaker 2: like you and I are trying to do. But we
Speaker 2: do have a lot of resistance because I do feel
Speaker 2: there's a lot of people that are trying to keep
Speaker 2: the people down, and I think you're really doing God's
Speaker 2: work and helping educate people and teach people. And there's
Speaker 2: no greater gift than teaching someone how to fish versus
Speaker 2: just giving them a fish.
Speaker 1: Financial literacy is the civil rights issue of this generation
Speaker 1: in my opinion. When you know better, you do better.
Speaker 1: We don't have much time left in this incredible podcast
Speaker 1: we've had together. This has been rich. I do want
Speaker 1: to cover a couple more things before we exit here.
Speaker 1: As you were talking about the waterfall and the coupon
Speaker 1: and all that, don't get a chance off enough to
Speaker 1: thank people who got helped to get us here. Magic
Speaker 1: Johnson would talk about all the people he'd leave a game,
Speaker 1: a basketball game and ask for the people would send
Speaker 1: those front benches for their cards, and he goes visit
Speaker 1: with them and use his credibility to get in their
Speaker 1: offices and just listen, right, And a lot of those
Speaker 1: guys end up doing deals with And basically you've just
Speaker 1: said the same thing. You're giving Warren Buffett some credit.
Speaker 1: Thanks for saying that. I woult to give Tony Wrestler
Speaker 1: two hundreds, which is man in the world, credit for
Speaker 1: doing a deal with me, and I own you know,
Speaker 1: at the end of that deal, all of the company.
Speaker 1: He just wanted a coupon. He just wanted a seven
Speaker 1: percent return on his money. Him and Michael Arraghetty. Everything
Speaker 1: else paying other than paying my debt, debt and preferred equity,
Speaker 1: I owned the rest, and we shouldn't. We should all
Speaker 1: be grateful and gracious about spreading the credit when we
Speaker 1: actually succeed. Is there somebody that you want to mention
Speaker 1: that helps you get here? Alex? And also, I didn't
Speaker 1: want to end with this, you know, rainbows after ms.
Speaker 1: The mistakes you made is something you kicked yourself about.
Speaker 1: Why did I do this stupid thing? Something you're not
Speaker 1: you know, that's a lesson now for the audience.
Speaker 2: Yeah, So I'll keep it to finances and mistakes that
Speaker 2: I've made there because we don't have enough documentary all
Speaker 2: my mistakes. So I'm gonna try to keep this tight.
Speaker 2: My good friend Grant Harrell once gave me great advice.
Speaker 2: He always talk about the five bes and he said,
Speaker 2: be brief, brother, be brief. So I'm going to take
Speaker 2: Grant's advice on that. So, first of all, I shout
Speaker 2: out to Tony Wrestler, who's my partner at the NBA.
Speaker 2: He's one of the coolest people that I've met, but
Speaker 2: also very generous, and he is someone that really believes
Speaker 2: in bringing people, all people in the room with him
Speaker 2: and give him an opportunity, as you will eloquently just
Speaker 2: described in your partnership with Tony and his partner and
Speaker 2: your other partner. As far as mistakes, I'll I go
Speaker 2: to two thousand and eight, because it was a really,
Speaker 2: really tough time with the financial meltdown. I bought a
Speaker 2: piece of property, five hundred units right around George Steinbern
Speaker 2: a field in Tampa where we held sprint training. And
Speaker 2: my thesis was it it's good enough for George Steinburn
Speaker 2: and the Yankees, it's got to be good for my apartments.
Speaker 2: So I basically bought five hundred units for about sixty
Speaker 2: thousand per door. Okay, I had twenty thousand of equity
Speaker 2: per door, and I had the loan for forty thousand.
Speaker 2: What happened was from a Monday to a Thursday when
Speaker 2: everything went upside down and we had the financial crisis
Speaker 2: in eight oh nine, my properties, my units were now
Speaker 2: worth thirty eight thousand, but I owed forty thousand. So
Speaker 2: basically that's what they call you're underwater, right, And unfortunately
Speaker 2: I was young and not experienced, and I had what
Speaker 2: is called the PG, which PG stands for personal guarantee.
Speaker 2: Oh yes, which if you're listening and you don't really
Speaker 2: remember anything else, John and I said, please remember this part.
Speaker 2: Never sign personal guarantees it unless it's your home. Now.
Speaker 2: I was fortunate enough to have some liquidity, and I negotiated.
Speaker 1: Everybody means cash cash.
Speaker 2: I was fortunate to have to have cash, and I
Speaker 2: was able to negotiate with the banks a very clever
Speaker 2: deal in which they had like a fifty million dollar
Speaker 2: write down in exchange for a four million dollar check.
Speaker 2: And then we said to the bank, look, you're not
Speaker 2: in the business of managing these assets, meaning multifamily apartments,
Speaker 2: we are, so why don't we give you a four
Speaker 2: million dollar check. You write down fifty million dollars. Immediately
Speaker 2: from losing two hundred thousand dollars a year in that portfolio,
Speaker 2: we started making two hundred thousand dollars a year because
Speaker 2: we owed less and we put more equity in. And
Speaker 2: then we said to the bank, when we sell and
Speaker 2: the next five years will give you another fifteen percent
Speaker 2: of the ups Wow. Eventually, right, thinking outside the box.
Speaker 1: John.
Speaker 2: Wow, the bank became a promoter on our deal. Yeah,
Speaker 2: that was what we call a win win win alignment structure,
Speaker 2: and we sold it for a big number. We gave
Speaker 2: the bank another few million dollars on the ups and
Speaker 2: to this day that's still my bank. And we did
Speaker 2: the right thing at the toughest time, and people and
Speaker 2: partners will never ever forget that because that builds your
Speaker 2: reputation in the business community.
Speaker 1: I'm so glad that you added that, Alex, because that
Speaker 1: is probably one of the best lessons anybody's going to
Speaker 1: get from this. There's something called non recourse debt. We
Speaker 1: don't have time to get into it now. It's the
Speaker 1: best kind of it's the most appropriate type of debt
Speaker 1: for the type of large scale transactions that Alex and
Speaker 1: I did. Either personal residence. It's nothing wrong with a
Speaker 1: personal guarantee. You know, I have a personal guarantee in
Speaker 1: our home, right, that's right. But you when you're doing
Speaker 1: business deals, should try to let the assets speak for themselves.
Speaker 1: But what he did structurally was brilliant. And when you're
Speaker 1: being run out of town, get in front of the
Speaker 1: crowd and make like a parade and I had followed him.
Speaker 1: I sort of knew. I thought I knew where he
Speaker 1: was going. But that last piece was very creative. He
Speaker 1: turned his banker into a venture capitalist, into a joint
Speaker 1: venture partner. It was really quite quite clever. And you
Speaker 1: turn a negative cash flow into a positive cash flow
Speaker 1: overnight through structure. Listen, everybody, there's a crisis coming in
Speaker 1: some parts of the economy. Commercial real estate. It's got
Speaker 1: a trillion dollars of refinancing they gotta do. In the
Speaker 1: next year or two. There may be properties that become available.
Speaker 1: Real estate has never gone down the history of the world,
Speaker 1: I mean in America rather over time. Think about some
Speaker 1: of this. It's not a problem, but as Alis just said,
Speaker 1: in your neighborhood, maybe some of this is an opportunity
Speaker 1: for you to reposit that asset, help the bank, the lender,
Speaker 1: help yourself, help your community, and create a little generational wealth. Alex,
Speaker 1: you are walking generational wealth. You're a walking in tech gritty.
Speaker 1: You're a good guy. And you know, we're all angels
Speaker 1: with dirty faces. You know, a saint is a centerlar
Speaker 1: got up. So none of us are perfect. But I
Speaker 1: like your imperfection. I like the way you roll and
Speaker 1: I appreciate you coming on this podcast and being so transparent. Charlemagne, myself,
Speaker 1: all of the friends of this podcast, thank you for
Speaker 1: just being you.
Speaker 2: John, thank you very much for having me. I consider
Speaker 2: your dear friend, and we're going to do a lot
Speaker 2: of great things together for the community and maybe even
Speaker 2: in business. But just one last message for your great audience,
Speaker 2: and again I want to just say how important it
Speaker 2: is that they know that they are smart, they are capable,
Speaker 2: they are enough. We just got to do a better
Speaker 2: job us as leaders to educate them and bring them along.
Speaker 2: And don't forget that. Remember this, remember this. A champion
Speaker 2: is a loser that tried one more time. Hmm. Don't
Speaker 2: give up and just keep on trying. You can do this.
Speaker 2: And John and I believe in you.
Speaker 1: Yeah, Alex believes in you. That's why he's pouring into
Speaker 1: you because he sees you in himself. He sees you
Speaker 1: as the little boy, the young person who is trying struggling.
Speaker 1: He sees his mother in the single parent households. He
Speaker 1: sees the young black men trying to make it as
Speaker 1: a parent, he sees his father there. He can relate
Speaker 1: to you because he was you, So go out there
Speaker 1: and kill it and then help somebody come up behind you.
Speaker 1: This is John O'Brien. This is Money and Wealth, and
Speaker 1: this is my man, Hey Rod.
Speaker 2: John, my man, Thank you so much for having me.
Speaker 1: Money and Wealth with John O'Brien is a production of
Speaker 1: the Black Effect Podcast Network. For more podcasts from the
Speaker 1: Black Effect Podcast Network, visit the iHeartRadio app, Apple Podcasts,
Speaker 1: or wherever you listen to your favorite shows.