WEBVTT - John Rogers 0:00:01.240 --> 0:00:05.840 Noted value investor. John Rogers of Aerial Investments started his 0:00:05.920 --> 0:00:09.080 firm when he was just twenty four years old. Rogers 0:00:09.200 --> 0:00:11.639 is chairman and co CEO of the company, and he 0:00:11.720 --> 0:00:15.280 sent down with Carlisle Group co chairman David Rubinstein for 0:00:15.360 --> 0:00:18.520 a wide ranging chat. Here's part of their interview on 0:00:18.600 --> 0:00:23.040 Rubenstein's Bloomberg television show Peer to Peer Conversations. So you've 0:00:23.040 --> 0:00:26.400 been doing value investing for thirty six years? What is 0:00:26.440 --> 0:00:30.920 a value investor? Value investor is someone who's looking for bargains. 0:00:31.120 --> 0:00:34.280 We're trying to find stocks that are selling a discount 0:00:34.320 --> 0:00:37.159 to what we think their private market value is. We 0:00:37.200 --> 0:00:39.080 want to make sure it's got a low p ratio, 0:00:39.840 --> 0:00:43.360 a strong balance sheet, and have the ability to really 0:00:43.400 --> 0:00:47.360 withstand the inevitable storms that happened in the stock market. Now, 0:00:47.440 --> 0:00:50.559 Warren Buffett, is he a value investor. He's the greatest 0:00:50.640 --> 0:00:53.440 value investor of all time. You know, sometimes people talk 0:00:53.479 --> 0:00:56.520 about whether Michael Jordan is better than Lebron James. There's 0:00:56.560 --> 0:00:59.000 no question when it comes to investing. The warrant is 0:00:59.040 --> 0:01:02.120 the best of ever, the best ever. Okay, But value investing, 0:01:02.160 --> 0:01:05.080 as I understand it is easier done when the markets 0:01:05.080 --> 0:01:07.480 are down. When the markets are high, there aren't as 0:01:07.520 --> 0:01:09.360 many bargains. So what have you been doing the last 0:01:09.360 --> 0:01:12.119 ten years because the markets have been very high. Well, 0:01:12.120 --> 0:01:16.679 it's been interesting. We were able to buy some terrific bargains, um, 0:01:16.800 --> 0:01:19.160 right around March of two thousand nine when the market 0:01:19.240 --> 0:01:22.360 was bottoming, and we got some great brands companies like 0:01:22.400 --> 0:01:26.959 CBS and Royal Caribbean CB Richard ellis a true bargains. 0:01:27.360 --> 0:01:30.360 But as the markets recovered, some some sectors have stayed 0:01:30.400 --> 0:01:33.880 really really cheap, in particular media. You know, we love 0:01:33.959 --> 0:01:38.200 companies like Viacom and Madison Square Garden Network. Those stocks 0:01:38.240 --> 0:01:41.840 are still really cheap. Financial services companies something you know 0:01:41.920 --> 0:01:46.480 well come with, like Lazard or KKR. There's some sectors 0:01:46.480 --> 0:01:48.720 of the market that just seem to be totally neglected 0:01:48.960 --> 0:01:51.840 even as the markets recovered. I just talk about the economy. 0:01:51.840 --> 0:01:55.080 The United States economy was intercession that ended in June 0:01:55.080 --> 0:01:58.480 of two thousand nine, and so now for about ten 0:01:58.560 --> 0:02:01.600 years we've been in a gross cycle, and um it's 0:02:01.640 --> 0:02:04.200 one of the longest gross cycles in our country's history. 0:02:04.560 --> 0:02:08.160 But therefore there haven't been a lot of depressed stock 0:02:08.240 --> 0:02:11.040 prices for this period of time. So are you kind 0:02:11.040 --> 0:02:13.560 of hoping that at some point there's a recession so 0:02:13.600 --> 0:02:15.840 we can get lower stock prices, you can buy more 0:02:15.960 --> 0:02:20.080 things at value prices. We we like to buy bargains. 0:02:20.080 --> 0:02:22.280 We like seeing sectors that are cheap. But we don't 0:02:22.320 --> 0:02:24.720 want to see a recession. You know, all the turmo 0:02:24.880 --> 0:02:27.640 turmoil that happens, you know, the impact on our society 0:02:27.680 --> 0:02:31.280 and our citizens. You know, recession is not great for America. 0:02:31.560 --> 0:02:33.880 So let's suppose I say I watched you and you're 0:02:33.880 --> 0:02:36.560 a good value investor. I'll give you some money. What 0:02:36.639 --> 0:02:41.560 kind of rate of return can I expect from your products? Well, 0:02:41.600 --> 0:02:44.720 you know, over the thirty six years, we've been able 0:02:44.800 --> 0:02:48.840 to compound money and over uply eleven a year. Uh, 0:02:48.840 --> 0:02:51.920 and that's something we're really proud of. Our aerial fund 0:02:51.919 --> 0:02:55.160 has been around since so it's thirty three years old, 0:02:55.200 --> 0:02:58.079 and uh, it's actually number one in this category going 0:02:58.120 --> 0:03:00.480 back to that period of time. But then neat thing 0:03:00.600 --> 0:03:02.480 is that we're one of those rare firms that has 0:03:02.520 --> 0:03:05.880 that thirty six year record with the same portfolio manager 0:03:05.919 --> 0:03:08.600 in charge, I've been fishing in the same fishing pond, 0:03:08.880 --> 0:03:12.080 not only value stocks, but small and midsized value stocks 0:03:12.240 --> 0:03:15.120 the entire timeframe. We have a great team of people 0:03:15.160 --> 0:03:16.880 that I work with have been with these some have 0:03:16.960 --> 0:03:20.120 been with the close to thirty years, some twenty years, 0:03:20.120 --> 0:03:22.880 some fifteen years. So we're a team of grizzle veterans. 0:03:23.360 --> 0:03:25.639 We think we can replicate our performance in the future. 0:03:25.800 --> 0:03:27.520 What is your best single deal, and then you can 0:03:27.520 --> 0:03:31.560 talk about I think over time. One of our best 0:03:31.560 --> 0:03:34.560 companies we've ever bought was Royal Caribbean. We were able 0:03:34.600 --> 0:03:36.400 to buy that in the high of the financial crisis. 0:03:36.480 --> 0:03:38.800 We never one thought that people would never cruise again, 0:03:39.480 --> 0:03:42.160 and that stock has gone up close to fifteen times 0:03:42.200 --> 0:03:45.440 itself from the bottom. We still think it's an extraordinary 0:03:45.440 --> 0:03:49.480 bargain here today. Um, A favorite of ours today is 0:03:49.800 --> 0:03:52.160 we we find that we think that, as I said earlier, 0:03:52.200 --> 0:03:54.200 some of the media stocks that are really really cheap, 0:03:54.640 --> 0:03:57.760 we're sort of optimistic that the Madison Square Garden Network 0:03:57.800 --> 0:04:00.480 will do really, really well when the Knicks only come 0:04:00.520 --> 0:04:03.040 back and start to win championships again, it's gonna be 0:04:03.040 --> 0:04:05.280 great for New York City and great for that stock. 0:04:05.600 --> 0:04:08.160 So let's talk about how you got started. So you 0:04:08.200 --> 0:04:11.680 grew up in Chicago. Both of your parents were fairly 0:04:11.760 --> 0:04:14.720 prominent people. So I understand that your father was in 0:04:14.800 --> 0:04:18.240 the Tuskegee Air Corps. What is the Tuskegee Air Corps 0:04:18.279 --> 0:04:20.760 for those who may not know. That was the group 0:04:20.800 --> 0:04:24.559 of UH fighter pilots that were part of World War two, 0:04:25.040 --> 0:04:27.680 the first group of African American fighter pilots that had 0:04:27.680 --> 0:04:31.560 a chance to really participate fully in the war. Before then, 0:04:32.120 --> 0:04:35.240 people didn't think that African Americans were qualified to fly 0:04:35.360 --> 0:04:38.520 aircraft in major wars. And so my dad was in 0:04:38.560 --> 0:04:41.600 the first group on the ninety nine fighter Pursuit Squadron 0:04:41.680 --> 0:04:44.640 to win overseas UH. And thought in World War two, 0:04:44.760 --> 0:04:46.880 when your father came back after World War Two, what 0:04:46.920 --> 0:04:49.400 did he do well? He um showed up at the 0:04:49.440 --> 0:04:52.160 University of Chicago law school. He wanted to go to 0:04:52.160 --> 0:04:54.360 the best law school, and he thought the University of 0:04:54.400 --> 0:04:57.599 Chicago was the best. At first, they didn't accept him 0:04:57.640 --> 0:05:02.240 because he hadn't taken all the appropriate tests and there 0:05:02.720 --> 0:05:05.440 were not many African American students at the law school 0:05:05.440 --> 0:05:07.720 at the time. But he asked them he could take 0:05:07.760 --> 0:05:09.880 a test, and they allowed him to take the test. 0:05:10.400 --> 0:05:13.080 He showed up in his captain's uniform, and I think 0:05:13.160 --> 0:05:15.640 the two things together you know, showing what a patriot 0:05:15.640 --> 0:05:18.640 he was and how good he did on what a 0:05:18.680 --> 0:05:20.800 great result he had on those tests. He was able 0:05:20.839 --> 0:05:23.240 to talk his way into the law school. Okay, and 0:05:23.320 --> 0:05:25.880 your mother, well, he met my mom the other first day. 0:05:26.800 --> 0:05:31.080 She was the first female African American at at the 0:05:31.360 --> 0:05:34.920 Chicago law school. She was. She graduated in ninety six 0:05:35.360 --> 0:05:38.080 and my dad in right. So he built a law 0:05:38.080 --> 0:05:41.200 practice and she built a law practice. They both had 0:05:41.240 --> 0:05:44.360 their own independent law practices because back then you couldn't 0:05:44.360 --> 0:05:47.760 work in a big, large, downtown law practice. My mom 0:05:47.839 --> 0:05:50.560 worked on divorces and my dad did mostly real estate 0:05:50.600 --> 0:05:55.120 and bankruptcies. You were the only child. I was, like, 0:05:55.120 --> 0:05:57.560 like myself, an only child. So the advantage of being 0:05:57.600 --> 0:05:59.159 an only child as your parents put a lot of 0:05:59.160 --> 0:06:00.960 time and attention and you. Was that a good thing 0:06:01.000 --> 0:06:05.640 for you? It was? They focused everything on me. They 0:06:05.640 --> 0:06:07.919 got divorced when I was three years old. So I 0:06:07.960 --> 0:06:10.800 had two different lifestyles. You know. My dad lived in 0:06:10.839 --> 0:06:14.320 a studio apartment, uh, not far from downtown, and my 0:06:14.360 --> 0:06:16.600 mom lived in more of a large house in Hyde Park. 0:06:17.279 --> 0:06:21.080 And um, they were different political persuasions. My mom was Republican, 0:06:21.160 --> 0:06:23.680 my dad was a Democrat. So I learned to sort 0:06:23.680 --> 0:06:26.680 of navigate two different worlds each and every week. And 0:06:26.720 --> 0:06:29.320 you went to the Chicago's famous Lab School, which is 0:06:29.360 --> 0:06:32.000 a school that is well known for I guess it's 0:06:32.040 --> 0:06:34.760 K to twelve. It's a CAD to twelve school. I 0:06:34.760 --> 0:06:37.839 I got their ninth grade. Okay. It's a terrific place. 0:06:38.240 --> 0:06:40.800 And in addition to your academic pursuits, you were a 0:06:40.800 --> 0:06:45.479 basketball player. I was. And you went to Princeton and 0:06:45.520 --> 0:06:48.800 you played basketball at Princeton. I was very fortunate to 0:06:48.800 --> 0:06:51.960 play basketball Princeton for the Hall of Fame coach Pete Kill. 0:06:52.640 --> 0:06:56.200 He was a legend and someone who really transformed my life. 0:06:56.400 --> 0:06:59.240 So you're the captain your senior year. I did get 0:06:59.279 --> 0:07:02.040 to be a captain. Odds. Did you think you were 0:07:02.040 --> 0:07:05.000 going to be an NBA player? You know, Coach Currol 0:07:05.040 --> 0:07:06.600 made it very clear that I had no hope to 0:07:06.640 --> 0:07:09.600 be an NBA player. Uh. He told me when I 0:07:09.680 --> 0:07:11.280 was a sophomore and I made the team, I was 0:07:11.320 --> 0:07:13.560 the last person on the team, the fifteen person on 0:07:13.600 --> 0:07:17.120 the team. He said, Johnny, you're legally blind and I 0:07:17.160 --> 0:07:21.120 can't teach vision, you can't dribble, and uh, but you 0:07:21.160 --> 0:07:22.840 work so hard. We'll keep you around for a few 0:07:22.840 --> 0:07:26.480 more days. So you graduated in in nineteen eight. What 0:07:26.520 --> 0:07:28.920 did you want to do? I had two role models, 0:07:29.120 --> 0:07:32.240 um that were stockbrokers. One across the street from a 0:07:32.320 --> 0:07:35.800 campus on Nassau Street, a guy named Mike Perkins that 0:07:35.880 --> 0:07:38.920 laidlaw Adams in pack. He helped me, showed showed me 0:07:38.960 --> 0:07:42.040 at Firestone Library where to go and research companies, how 0:07:42.080 --> 0:07:44.520 to find newsletters on the stock market. And then I 0:07:44.560 --> 0:07:46.920 had a broker home at home in Chicago named Stacey 0:07:46.960 --> 0:07:50.800 Adams who was the first African American stockbroker Onlsalle Street. 0:07:51.160 --> 0:07:52.720 And I would go and sick sit with him and 0:07:52.760 --> 0:07:56.120 watch the ticker tape go by. So I thought, if 0:07:56.120 --> 0:07:58.120 you loved the stock market like I did, you would 0:07:58.120 --> 0:08:01.240 become a stockbroker. And I was forced to be hired 0:08:01.240 --> 0:08:04.920 by William Blair and Company in Chicago. The managing partner 0:08:04.920 --> 0:08:07.320 of the time, Nedjanada, was a Princeton grad. It played 0:08:07.320 --> 0:08:11.840 football at Princeton and very close to Don Rumsfeld, and 0:08:11.880 --> 0:08:13.920 Ned helped recruit me there and gave me a great 0:08:13.920 --> 0:08:16.400 opportunity to start my career at a great firm. Okay, 0:08:16.440 --> 0:08:18.600 so you stayed there ten years or so, before you 0:08:18.640 --> 0:08:21.200 were ready to do something else. No, I stayed, Uh, 0:08:21.240 --> 0:08:23.840 about two and a half years. That's enough time to 0:08:23.920 --> 0:08:27.720 learn the business, I thought. So I had confidence in 0:08:27.720 --> 0:08:32.120 my strategy of investing in small and mid sized undervalued securities. 0:08:32.160 --> 0:08:34.600 And as I said earlier, there were not many people 0:08:34.600 --> 0:08:36.559 doing that, so we felt we were kind of pioneers 0:08:36.559 --> 0:08:39.520 in the small value place. There were a few firms 0:08:39.559 --> 0:08:43.440 like Chuck Royce's firm, Ralph Wanger at Acorn Funds, a 0:08:43.480 --> 0:08:45.840 couple of others, but not many people like to focus 0:08:45.840 --> 0:08:47.520 in that area of the market. So you started your 0:08:47.520 --> 0:08:50.480 own company? What age I was twenty four and where 0:08:50.520 --> 0:08:53.320 did you get the money to capitalize it? Well? I 0:08:53.360 --> 0:08:55.880 went to Uh, of course, friends and family, you know. 0:08:55.920 --> 0:08:58.280 I I tell people my my my mom gave me 0:08:58.360 --> 0:09:01.560 everything she had that was liquid. My dad gave me 0:09:01.559 --> 0:09:04.520 what he thought he could afford to lose. And after 0:09:04.559 --> 0:09:06.760 that I went to some of my former clients, my 0:09:06.800 --> 0:09:09.720 high school buddies from the lab school, anyone that could 0:09:09.720 --> 0:09:11.720 give me ten thousand dollars to help me start the company. 0:09:11.760 --> 0:09:14.360 How much capital did it take to start it? Roughly 0:09:14.400 --> 0:09:17.240 a little over two hundred thousand dollars, okay, and that 0:09:17.360 --> 0:09:20.920 was what year that was? And where'd you get the 0:09:21.000 --> 0:09:23.599 name Ariel from? You know, I love the way the 0:09:23.679 --> 0:09:26.520 name sounded. It was a character on a favorite TV 0:09:26.600 --> 0:09:29.040 show of mine, and I always said, if I have 0:09:29.120 --> 0:09:31.720 a daughter, I'm gonna name my daughter Ariel. Okay, But 0:09:31.800 --> 0:09:36.320 I had the company first. How much are you managing now? 0:09:36.360 --> 0:09:39.800 About thirteen and a half billion dollars? And you managed 0:09:39.840 --> 0:09:42.160 more at one point before the Great Recession? So it 0:09:42.240 --> 0:09:44.400 came down as with these as was the case with 0:09:44.440 --> 0:09:47.360 many companies, and in fact, how much money did you 0:09:47.360 --> 0:09:49.520 actually go down to? What? How low did you go? 0:09:49.880 --> 0:09:52.839 We got under three billion dollars? So do you think 0:09:52.880 --> 0:09:55.040 you maybe should fold up shop when you're under three 0:09:55.040 --> 0:09:58.080 billion after you're having twenty or so billion? No, not 0:09:58.160 --> 0:10:01.800 at all. You know, we m had learned. I think 0:10:02.280 --> 0:10:04.560 one of the lessons I learned from my father and 0:10:04.640 --> 0:10:07.600 Melodie Hopson, our president, agree completely was we should always 0:10:07.640 --> 0:10:11.600 keep money saved for a rainy day. And sure enough 0:10:11.640 --> 0:10:14.240 we had a hurricane with the financial crisis, but we 0:10:14.280 --> 0:10:16.559 had saved enough capital in our company so that we 0:10:16.600 --> 0:10:19.240 can continue to pay our salaries and keep our key 0:10:19.280 --> 0:10:22.800 people in place during that tough, tough period. And so 0:10:22.840 --> 0:10:25.160 that was really, really an important part of our approach, 0:10:25.960 --> 0:10:29.079 and then we bought our best stocks UH at really 0:10:29.120 --> 0:10:31.760 bargain prices during that period. And I think people like 0:10:31.880 --> 0:10:33.840 that that we stuck to our guns and believe in 0:10:33.840 --> 0:10:36.760 what we're doing. Now, some people say that it's impossible 0:10:36.760 --> 0:10:39.000 to beat the markets, and so therefore one should just 0:10:39.080 --> 0:10:42.160 buy index funds. Uh. In your case, you don't have 0:10:42.240 --> 0:10:46.680 index funds. Necessarily, you pick stocks. Why should somebody give 0:10:46.720 --> 0:10:49.800 money to a stock picker rather than just somebody who's 0:10:49.800 --> 0:10:52.560 just gonna reflect whatever the sp or whatever the index 0:10:52.640 --> 0:10:55.480 might be. Well, I think that the reason to do 0:10:55.520 --> 0:10:58.720 that is there are talented money managers out there who 0:10:58.760 --> 0:11:01.400 can add value. And it's been proven over time that 0:11:01.440 --> 0:11:03.840 there are people who have that gift and that creativity 0:11:03.840 --> 0:11:07.840 and that vision to buy securities and outperform the markets. 0:11:08.200 --> 0:11:10.840 Now it's hard to find them. Um, there are few 0:11:10.840 --> 0:11:13.520 and far between, But I think it's worth the effort, 0:11:13.880 --> 0:11:16.080 and I think it's often and I say, it's like sports. 0:11:16.080 --> 0:11:18.360 You know, you you root for your local teams, even 0:11:18.360 --> 0:11:21.439 though you know that half the teams are gonna lose 0:11:21.480 --> 0:11:23.360 and half the teams are gonna win. Everyone can't be 0:11:23.400 --> 0:11:26.920 the world champion. Every year, but you still like to 0:11:26.960 --> 0:11:29.600 be engaged and involved in the competitive pursuit of trying 0:11:29.640 --> 0:11:32.199 to find a championship or support a champion. I think 0:11:32.200 --> 0:11:34.840 it's the same with money managers. To keep up with 0:11:34.880 --> 0:11:37.200 what's going on in the world. Do you use computers? 0:11:37.760 --> 0:11:40.480 I actually don't use the computer. Do you ever go 0:11:40.559 --> 0:11:43.840 on the internet? I do have the Internet on my phone, 0:11:44.360 --> 0:11:46.200 but I'm one of these folks that I've never actually 0:11:46.200 --> 0:11:49.760 had a computer. I've never turned a computer on. Use emails? 0:11:50.080 --> 0:11:52.720 I don't email. So how do you people get messages 0:11:52.760 --> 0:11:55.120 to you today? Send a pigeon with a messenger? How 0:11:55.120 --> 0:11:56.560 do they How do they get a message to you? 0:11:56.760 --> 0:11:59.600 They can just call me. So you're on a number 0:11:59.600 --> 0:12:03.840 of corps boards, and you are legendarily very um loyal 0:12:03.920 --> 0:12:06.319 to your corporate boards. One of the boards you're on 0:12:06.480 --> 0:12:09.480 is McDonald's, and it is said, I don't know if 0:12:09.480 --> 0:12:14.559 it's possibly true that you eat McDonald's every day somewhere 0:12:14.559 --> 0:12:16.240 in the world, wherever you are, you eat one meal 0:12:16.280 --> 0:12:19.360 a day at some McDonald's. Is that true? It's just 0:12:19.480 --> 0:12:22.560 about every day. I mean there's exceptional times when you're 0:12:22.559 --> 0:12:26.360 traveling where I can't actually get that done. But I 0:12:26.400 --> 0:12:28.559 love being a McDonald's sort of my home away from home. 0:12:28.880 --> 0:12:31.160 And you do that before you're on the McDonald's board. 0:12:31.720 --> 0:12:33.680 I've been doing that since I got home from college. 0:12:34.120 --> 0:12:36.400 I just love it there. Um, and you think it's 0:12:36.480 --> 0:12:38.880 very healthy for you. It seems like it's worked out 0:12:38.880 --> 0:12:41.000 okay so far for me far. So when you were 0:12:41.040 --> 0:12:43.520 interviewing to be on the board, I presumed the interview 0:12:43.520 --> 0:12:45.120 to be on the board. Did you mention this and 0:12:45.400 --> 0:12:49.240 did they think this was unusual? I still remember having 0:12:49.320 --> 0:12:53.280 a breakfast with Any McKenna, who became the non executive 0:12:53.360 --> 0:12:56.440 chairman of McDonald's, and Jim Countal Loopo, the CEO, and 0:12:56.960 --> 0:12:59.640 it went marvelously well because they could tell how much 0:12:59.640 --> 0:13:02.319 I loved brand. So you used to play a lot 0:13:02.320 --> 0:13:05.840 of three on three basketball? Yes, so in Chicago. Did 0:13:05.880 --> 0:13:10.440 you ever play basketball with Barack Obama? Yes, several times. 0:13:10.840 --> 0:13:13.079 And is he that good a player? He's a very 0:13:13.080 --> 0:13:16.200 good player. He knows what he's doing. He's a little 0:13:16.240 --> 0:13:19.040 bit of a in between size. Uh. You know, he's 0:13:19.040 --> 0:13:20.880 sort of six two and a half or so, and 0:13:21.120 --> 0:13:23.920 he can't dunk the ball, right, I don't know about that. 0:13:24.559 --> 0:13:26.360 You think he could dunk? I think he probably could. 0:13:27.440 --> 0:13:30.200 He's a little left handed, you know, but he's a 0:13:30.440 --> 0:13:32.800 He's a very good player and makes clutch shots all 0:13:32.840 --> 0:13:35.800 the time under pressure. There was another player in Chicago, 0:13:36.000 --> 0:13:39.719 maybe better than even Barack Obama named Michael Jordan's. H 0:13:39.800 --> 0:13:42.640 did you ever play against Michael Jordan's. I did get 0:13:42.679 --> 0:13:47.840 to play Michael against Michael around Chicago a lot. You know, 0:13:47.920 --> 0:13:49.840 he would be at different clubs and you get to 0:13:49.840 --> 0:13:52.520 be on the fourt with him. I think he was overrated. No, 0:13:52.920 --> 0:13:55.080 he is, I think the greatest player of all time. 0:13:55.480 --> 0:13:58.559 So one time, I understand you played against him and 0:13:58.600 --> 0:14:00.439 you beat him. The only person who ever beat him 0:14:00.480 --> 0:14:04.319 on a a was a one on one game. Yes, 0:14:04.400 --> 0:14:06.760 it was a very fortunate circumstance. I used to go 0:14:06.840 --> 0:14:09.600 to his Senior Flights School, which is a fantasy camp 0:14:09.920 --> 0:14:13.040 for people thirty five years and older, and so every 0:14:13.080 --> 0:14:15.600 summer at the camp, he would challenge any camper to 0:14:15.640 --> 0:14:18.880 a short game of one on one, first of three 0:14:18.880 --> 0:14:22.240 wins and m since no one had beat him in 0:14:22.280 --> 0:14:24.000 the first seven years of the camp, I think he 0:14:24.040 --> 0:14:26.560 was kind of a little overconfident. He would let people 0:14:26.560 --> 0:14:28.600 make a basket or two before he sort of clamped 0:14:28.600 --> 0:14:32.360 down and shut people down. Also, I had the advantage 0:14:32.360 --> 0:14:34.360 when I played him. I think he played about fifteen 0:14:34.400 --> 0:14:36.640 campers before he got to me, so he's kind of tired, 0:14:37.640 --> 0:14:40.440 and so I was snuck up on him. And UH, 0:14:40.640 --> 0:14:42.520 coach Curl always said that even though I wasn't a 0:14:43.000 --> 0:14:44.920 good passer, I was a good one on one player, 0:14:45.600 --> 0:14:47.840 and so I had a couple of tricky shots and 0:14:47.880 --> 0:14:50.680 the last tricky shot right as it was about to 0:14:50.680 --> 0:14:52.560 go in. You can hear Michael say on the video, 0:14:52.880 --> 0:14:56.440 oh no, and that was really fun. And one when 0:14:56.480 --> 0:14:59.480 one of the people you were playing basketball against, Barack Obama, 0:15:00.040 --> 0:15:01.960 I told you he was going to run for president 0:15:02.040 --> 0:15:05.000 United States? What did you say? I told him. I 0:15:05.000 --> 0:15:08.320 thought it was a terrific idea. I remember he came 0:15:08.360 --> 0:15:10.880 over to the office to tell me his plans. And 0:15:12.440 --> 0:15:14.800 I know, I you know, I know sometimes that people 0:15:14.840 --> 0:15:16.960 wait a little bit more to get a little more seasoned. 0:15:17.000 --> 0:15:19.360 But I felt that he was really ready. I was 0:15:19.440 --> 0:15:22.960 totally confident in his ability to be the commander in chief, 0:15:23.000 --> 0:15:25.360 and so I encouraged him strongly to run. Hey, and 0:15:25.440 --> 0:15:28.360 did you get involved in the campaign. I did. I 0:15:28.400 --> 0:15:32.720 got to be co chairman of the Illinois Finance Committee 0:15:33.240 --> 0:15:36.120 with a friend of yours, Jim Crown. We worked for 0:15:36.120 --> 0:15:38.760 Penny Pritzker and that was a magical thing to be 0:15:38.800 --> 0:15:41.520 able to be involved on the ground floor. And then 0:15:41.560 --> 0:15:44.760 once he was elected president, UM, I got to be 0:15:44.960 --> 0:15:49.760 co chairman of the inauguration and that was special, and 0:15:49.800 --> 0:15:53.000 it was really special. When he first got elected, we 0:15:53.000 --> 0:15:57.360 were the temporary transition headquarters at Ariel so for three days. Um, 0:15:57.400 --> 0:16:00.400 he was there helping to form the government. And right, 0:16:00.960 --> 0:16:05.640 so we'll never forget. Now you helped him in his campaign. 0:16:05.760 --> 0:16:08.800 He's using your offices for the transition. Did he offer 0:16:08.880 --> 0:16:10.800 you a job and if so, why didn't you not 0:16:10.880 --> 0:16:15.240 take it? But we never we never really had that conversation. UM. 0:16:15.320 --> 0:16:18.920 I love investing and I love our business and I 0:16:18.960 --> 0:16:21.040 have a great team, as I mentioned earlier at arials, 0:16:21.080 --> 0:16:23.000 so there was never a thought that I would go 0:16:23.080 --> 0:16:27.560 to Washington right now. In the philanthropic area, you obviously 0:16:27.600 --> 0:16:30.560 are a philanthropic leader in Chicago. What are the areas 0:16:30.600 --> 0:16:34.760 of interest you have in philanthropy. Well, we've been working 0:16:34.800 --> 0:16:37.560 really hard on David is the sort of the idea 0:16:37.600 --> 0:16:40.840 of how to solve for the wealth gap in our 0:16:40.880 --> 0:16:45.120 country between sort of the minority communities and the majority communities. 0:16:45.440 --> 0:16:47.760 And you know, there's all this data that shows how 0:16:47.800 --> 0:16:51.400 the wealth gap has gotten larger, particularly between African Americans 0:16:51.400 --> 0:16:54.920 and white Americans. So we started a small public school 0:16:55.520 --> 0:16:59.520 over twenty two years ago to teach financial literacy in 0:16:59.560 --> 0:17:03.200 a public school to get young people prepared, uh, to 0:17:03.280 --> 0:17:05.400 be able to pick their own stocks and be able 0:17:05.440 --> 0:17:07.679 to navigate their foe own K plan and all the 0:17:07.720 --> 0:17:10.600 things they need to do. Most recently, we created a 0:17:10.600 --> 0:17:13.040 program at the University of Chicago for minority students to 0:17:13.119 --> 0:17:17.520 work during the summer um in in the investment offices 0:17:17.520 --> 0:17:20.720 of major endowments. Now, your parents were prominent leaders in 0:17:20.760 --> 0:17:23.199 the African American community in Chicago and prominent leaders in 0:17:23.200 --> 0:17:26.800 the Chicago community. So, uh, when you were growing up 0:17:26.920 --> 0:17:28.720 or now that you live in Chicago, do you feel 0:17:28.800 --> 0:17:31.359 discrimination or have you've been able to bypass that. I 0:17:31.440 --> 0:17:34.640 have to say that when people think about supporting minority business, 0:17:35.119 --> 0:17:40.160 it's typically around what they call supplier diversity, construction, catering 0:17:40.680 --> 0:17:44.320 things that are you know, bought through procurement. And my 0:17:44.400 --> 0:17:46.920 mom had this challenge when she was building her law practice, 0:17:46.920 --> 0:17:49.600 and my dad too too, that people just didn't think 0:17:49.640 --> 0:17:53.199 about hiring a minority lawyer to do their transactions, and 0:17:53.240 --> 0:17:55.199 the same thing when it comes to money management. We 0:17:55.200 --> 0:17:58.200 were the first African American money management and mutual fund 0:17:58.200 --> 0:18:01.080 company to start in the country's history. So when we 0:18:01.119 --> 0:18:03.560 went to see people, they had never thought about hiring 0:18:03.640 --> 0:18:06.639 someone that was African American to manage their money or 0:18:06.720 --> 0:18:08.480 to have our mutual funds in their four O n 0:18:08.520 --> 0:18:11.439 K plan. You've mentioned a few times Melody Hobson for 0:18:11.440 --> 0:18:14.000 those who may not know. She's the president of your 0:18:14.040 --> 0:18:17.680 company or the CEO. And she's the president and she's 0:18:17.720 --> 0:18:20.520 somebody who also went to Princeton. Do you hire people 0:18:20.560 --> 0:18:24.520 that didn't go to Princeton? We do. And Melodie came 0:18:24.560 --> 0:18:29.119 from a challenge background, I think you would say, but 0:18:29.280 --> 0:18:31.960 she's now become a very well known tell us about 0:18:32.000 --> 0:18:34.399 her a little bit. I met Melody when she was 0:18:34.440 --> 0:18:39.000 a prospective Princeton student. She was seventeen years old, and UH, 0:18:39.280 --> 0:18:41.200 we were trying to make sure that all the local 0:18:41.240 --> 0:18:45.399 alumni were interviewing all the prospective students, and uh we 0:18:45.440 --> 0:18:48.320 had a special event for all the admitted students, and 0:18:48.440 --> 0:18:51.040 Melody came and I sat her at the head table 0:18:51.080 --> 0:18:53.240 because we could tell throughout the process that she was 0:18:53.280 --> 0:18:56.679 something really, really special. And so she sat next to 0:18:56.720 --> 0:18:59.399 a person who Richard Missner, who convinced her not to 0:18:59.440 --> 0:19:02.560 go to Harvard and to go to Princeton instead. She 0:19:02.680 --> 0:19:06.200 then became a summer intern with us at Ariel and 0:19:06.240 --> 0:19:08.720 then she's been a summer tiro Price in Baltimore. She 0:19:08.800 --> 0:19:11.719 had a great time, and she joined us when she graduated. 0:19:12.080 --> 0:19:14.600 So she says, she's the only person from her Princeton 0:19:14.600 --> 0:19:17.520 class that has the same phone number twenty nine years later, 0:19:18.280 --> 0:19:21.359 and she is taking on more and more leadership at 0:19:21.359 --> 0:19:25.280 the company every year. She'll be my successor. And uh, 0:19:25.320 --> 0:19:27.399 it's so wonderful have a partner who's as tough and 0:19:27.440 --> 0:19:29.640 smart as she is. Okay, now you have your finger 0:19:29.720 --> 0:19:31.600 on the pulse of the economy since you're looking at 0:19:31.640 --> 0:19:33.919 stocks all the time that are reflective of the U. 0:19:34.000 --> 0:19:36.800 S economy? Are you worried about a recession in the 0:19:36.800 --> 0:19:40.960 near future. I'm not worried about the recession. You know, 0:19:41.000 --> 0:19:43.000 we think long term at Ariel. As you know, our 0:19:43.040 --> 0:19:46.960 logos a turtle. We believe that patients wins. And I 0:19:46.960 --> 0:19:50.840 always remind myself Warren Buffett, you know, always says that 0:19:51.080 --> 0:19:54.280 last century. The Dallas started at sixty six and ended 0:19:54.280 --> 0:19:57.920 it over eleven thousand, and we had two world wars, 0:19:57.960 --> 0:20:01.399 a great depression, press and it's assassinated. It was an 0:20:01.440 --> 0:20:05.880 extraordinary hundred years. But the market always marches back. Are 0:20:05.920 --> 0:20:08.120 you not worried that the US government, for example, has 0:20:08.160 --> 0:20:11.480 twenty two trillion dollars of indebtedness and we're adding at 0:20:11.480 --> 0:20:13.199 one point three trillion a year or is that a 0:20:13.240 --> 0:20:16.159 concern or not so much? Not so much? You know 0:20:16.280 --> 0:20:18.400